ACCA Applied Skills · Taxation (UK) · The comprehensive computation of taxable income and income tax liability
Zara has no earnings in the tax year. She wants to obtain tax relief on the maximum amount that can qualify for relief on a personal pension contribution without earnings. How much must she actually pay into the scheme, net of basic rate relief at source?
She pays £2,880. The £3,600 limit for a person with no earnings is a gross figure. Under relief at source she pays 80% of it, £2,880, and the pension scheme claims the remaining 20% from HMRC.
- A£3,600
- B£2,880Correct
- C£3,000
- D£4,500
Explanation
The maximum contribution qualifying for relief with no earnings is £3,600 gross. Relief at source means she pays 80% of this, which is £2,880, and the scheme claims the £720 basic rate relief from HMRC. Paying £3,600 would treat the limit as a net figure.
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