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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the use of exemptions and reliefs in deferring and minimising income tax liabilities

Priya has no earnings in 2025/26 and is not a member of an occupational pension scheme. She wants to pay into a relief-at-source personal pension. What is the maximum gross contribution on which she can obtain tax relief for 2025/26?

The maximum gross contribution that qualifies for tax relief without any earnings is £3,600. Priya would pay £2,880 net and the pension scheme would reclaim £720 of basic rate relief. The annual allowance of £60,000 is only available to the extent of relevant earnings.

  1. A£3,600Correct
  2. B£2,880
  3. C£12,570
  4. D£60,000

Explanation

With no relevant earnings, the maximum contribution that can qualify for tax relief is £3,600 gross, per the tax rates and allowances tables. She would pay £2,880 net, with the scheme claiming £720 basic rate relief. £2,880 is the net payment, not the gross amount that qualifies. £12,570 is the personal allowance, which is irrelevant to the limit, and £60,000 is the annual allowance, which is capped by earnings.

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