Auto-enrolment – tax relief on contributions

Tax relief for employers

Employer’s contributions can be offset against profits to reduce a liability to a) corporation tax or b) income tax, if not incorporated.

For employers who do not run a business and are not chargeable to tax on profits, where a nanny is employed, for example, you can’t claim tax relief for pension contributions you make for your employees.

Tax relief for employees

Employee contributions qualify for income tax up to a maximum of £40,000 (2014/15) per year and the relief is received at source either by a) paying contributions net of basic rate tax, which the pension scheme reclaims for the employee from HMRC or b) having contributions deducted from their pay before PAYE is calculated.

Where basic tax relief has been received by an employee who is liable for higher rate tax, they can claim further relief through the self assessment system.

For further assistance on auto-enrolment and how it affects you, contact us today.