There is no limit to how much you pay into your pension pot but you will only get tax relief on a certain amount. Normally, it is not to your advantage to pay money into a pension without getting tax relief so the maximum contribution limit is normally seen as the most you can pay into your pension.
If you are employed you can contribute 100% of your annual earnings before tax up to a limit of £40,000 for 2020/21. If you are self-employed it is 100% of pre-tax profits. This is called the annual allowance.
However, if you earn more than £150,000, the amount you can contribute is gradually reduced at a rate of £1 for every £2 earned over £150,000, until the tax-free limit hits £10,000. This is called ‘tapering and is fiendishly complicated ’.
If you are not earning, you can contribute up to £3,600 per tax year and still get basic-rate tax relief. So, non-workers can pay in £2,880 per tax year, to which the taxman will add £720.
