There are not many things you can spend on these days which get you tax relief. Pensions have to be one of the best investments around and you get tax relief on what you put in – subject to certain restrictions.
You can get relief on what you put in subject to a maximum of 100% of your earnings and subject to an overall maximum of £50,000 a year.
If you make the pension contributions yourself you pay these contributions net of basic rate tax, currently 20%. There will then be further relief if you are a higher rate or additional rate taxpayer.
For the self-employed and people with their own companies, there is a lot to be said for self invested personal pensions or self administered schemes when you can (again with restrictions) choose what your pension fund is invested in.
If you are a basic rate taxpayer, think of it this way. You invest £80 in a pension and the Revenue adds £20. That is a tax free 25% return in one year.
