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It was understood that, to make a personal pension contribution, then subject to the lower limit of £3,600, the taxpayer must have earned income of at least an equivalent amount. This is the case, but relief may effectively be obtained against investment income and employer contributions should not be overlooked
I was always under the impression that one had to have relevant income which did not include dividends in order to make a pension contribution.
To put it simply ignoring personal allowances if one wanted to make a contribution of £20 000 then there had to be £20 000 earned income.
I have a client who like many others takes a small salary (equal to the personal allowance) from his company and dividends.
An independent financial adviser has recommended that he should make a pension contribution to limit his exposure to higher rate tax. Putting aside whether this would be tax-efficient can this be done in principle?
I wrote to HMRC asking this question and received a somewhat ambiguous answer saying that “in certain circumstances pension contributions can be set against dividend income” but the response did not give clarify those circumstances.
I look...
