Recover personal allowances:
· Pension contributions reduce an individual’s taxable income. So they are a great way to reinstate the personal allowance.
· For a higher rate tax-payer with taxable income of between £100,000 and £120,000 an individual contribution that reduces taxable income to £100,000 would achieve an effective rate of tax relief of 60%. For higher incomes, or larger contributions, the effective rate will fall somewhere between 40% and 60%.