Accounting for tax relief in UK Personal Pension Contributions

If you have a personal pension plan, and make contributions into it, then these may be made from income that has already been taxed.

For example, a monthly gross contribution of GBP125 may be made up of GBP100 that you pay yourself, and tax relief of GBP25 - paid by the government (note, these are notional figures and probably do not correspond to the real tax relief amount).

If this is tracked in Microsoft Money, accounting for one's own payment is reasonably simple, in that it is a GBP100 transfer from an existing account.

To account for the GBP25 tax relief, you'll need to make another contribution. In the contributions part of the retirement account you can add an additional deposit to take care of the tax relief. Use "other income:tax relief" category and subcategory.

If your contribution is scheduled, then you might want to make the tax relief a scheduled transaction also. Or, perhaps even better, would be to make a single scheduled transaction which contains part transfer and part tax relief.

Category: Tax

Keywords: GBP, PPP, Pension