I had a taxable income of about £60,000 in 2009/10, made up entirely of dividends and bank interest. I also pay £2,400 per year into a personal pension. Will I get 40% tax relief on that pension contribution?
You will receive higher rate tax relief on your pension contribution if you make the claim on your tax return for 2009/10. A contribution of £2,400 is worth £3,000 to your pension fund as the pension scheme trustees reclaim £600 basic rate tax from HMRC. Your basic rate tax limit will be expanded to £40,400 by the gross value of your pension contribution. This means £3,000 of dividends which would have been taxed at the higher rate applicable to dividends of 32.5%, will be taxed at 10%, saving you an additional 22.5% in tax, or £675.