Income tax relief on Pension Contributions - Low Earner

[carboot]

If you are a low earner and do not pay tax, what is the maximum pension contribution that attracts the additional 25% tax addition from HMRC?
My wife earns £10k Gross. She (and employer) currently make no pension contributions.
I want to contribute to a new SIPP for her and have HMRC add their 25% Relief at Source addition.

What is the maximum I can contribute that will attract the HMRC addition of 25%.
Is it £2,880 (+HMRC will add a maximum of £720 = £3,660) or,
Is it £8k (+HMRC will add a maximum of £2,000 = £10,000)

[JohnB]

The latter, you get the tax relief even if you've not paid the tax. I rang up HMRC to ask them this once.. You do need to be in a relief at source scheme, though,

See http://forums.moneysavingexpert.com/sho ... ?t=5192668 and the links from it to Royal London, and the muttering how HMRC are ambiguous

[JohnB]

Its 20% of the gross, which is 25% uplift on the net. So for £100 gross its £20 from the government, £80 from you.

[carboot]

Thanks for the replies.
I see now that there have been similar posts on www, with varying interpretations by experts.
As an example the logal LGPS administrator believes the relevant max payment under RAS is £2,880 + £720.

Reading the posts, I think the confusion is caused by the ambiguous wording in FA2004 s190(1)
"..Maximum relief..amount of the individual’s relevant UK earnings which are chargeable to income tax..".
1. Does Earnings .."chargeable to tax" mean the UK earnings should be reduced by Personal allowance (in which case maximum contributions are limited to £2,880 + £720), or
2. The deduction of Personal allowance is ignored (in which case maximum contributions are limited to £8,000 + £2,000).

Option 2 looks the more logical, but whatever I think, I am grateful for your comments.
I will be going forward with option 2.

[pochisoldi]

Thanks for the replies.
I see now that there have been similar posts on www, with varying interpretations by experts.
As an example the logal LGPS administrator believes the relevant max payment under RAS is £2,880 + £720.

Reading the posts, I think the confusion is caused by the ambiguous wording in FA2004 s190(1)
"..Maximum relief..amount of the individual’s relevant UK earnings which are chargeable to income tax..".
1. Does Earnings .."chargeable to tax" mean the UK earnings should be reduced by Personal allowance (in which case maximum contributions are limited to £2,880 + £720), or
2. The deduction of Personal allowance is ignored (in which case maximum contributions are limited to £8,000 + £2,000).

Option 2 looks the more logical, but whatever I think, I am grateful for your comments.
I will be going forward with option 2.

"Chargeable to tax" means liable to be taxed at the relevant rate, even if that rate happens to be 0%.

PochiSoldi