How does the basis year work?

basis year
0
Posted

How does the basis year work?

0

For those who would like to contribute more than the earnings threshold in any tax year, this must be justified by their earnings. From 6 April 2001 it is possible for a member to nominate a basis year for their earnings. This year may be: i) the current tax year, or ii) any of the previous five tax years (the member does not have to have been a member of a personal pension plan during the basis year, but must have had net relevant earnings NREs). When calculating how much they may contribute, the member must use their NREs in the basis year they have chosen, and their age on 6 April of the current tax year. The NREs used in the basis year can be used to pay contributions in excess of 3,600 pa (subject to normal PP limits) not only in the basis year itself but also the following five tax years.

Related Questions