RPSM13103020 - Technical Pages: International: Overseas membership of a registered pension scheme: Relief for individuals' contributions

Relief for individuals' contributions

Relief from UK income tax on an individual's contributions to a registered pension scheme under section 188 is dependent on their being a relevant UK individual during a tax year. An individual will be a relevant UK individual for a tax year if:

• they have relevant UK earnings chargeable to UK income tax for that year,
• they are tax resident in the UK at some time during that year,
• they were tax resident in the UK both at some time during the five tax years immediately before that year and when they became a member of the pension scheme, or
• they have, or their spouse or civil partner has, for that year general earnings from overseas Crown employment subject to UK tax.

Under section 190 there is an annual limit for relieved contributions of the greater of:

• the individual's relevant UK earnings which are chargeable to UK income tax for the tax year, and
• the basic amount of £3,600 (or such greater amount as the Treasury may by order specify) if relief at source is provided under section 192 (see RPSM05101320).

This means that if an individual is a relevant UK individual but has no relevant UK earnings that are so chargeable then relief from UK income tax is only available on contributions up to £3,600 in a tax year. Someone who meets the third of the above conditions for being a relevant UK individual will qualify for relief up to that level in each of the five tax years after ceasing to be UK resident. But they can only receive that relief if their registered pension scheme operates relief at source.

The above restrictions are the only ones that apply to the amount of UK tax relief an individual may receive at the time contributions are made. However, once relief has been received, the whole value of the individual’s pension savings in any year is tested against the annual allowance. The annual allowance charge applies if the annual allowance (see RPSM06100010) is exceeded in a tax year by the total pension input amount relating to the individual under those registered pension schemes and certain overseas pension schemes of which they are a member.

The pension input amount in respect of a registered pension scheme is the amount of any contributions made by or in respect of the individual to it or the amount of any increase in value of the individual's rights under it (see RPSM06100130). The pension input amount in respect of a currently-relieved non-UK pension scheme (see RPSM13102320) is calculated on a similar basis but is adjusted if the individual has employment income that is not subject to UK tax (see RPSM13102350 to RPSM13102380).

The annual allowance charge applies regardless of where the individual is resident. It is not covered by double taxation agreements (see RPSM13103040) because it is not a tax on income but on excess relief.