Glossary · UK
What is Net Relevant Earnings (NRE)?
The earnings cap used to determine maximum pension tax relief. You can only receive pension tax relief on contributions up to 100% of your Net Relevant Earnings in a tax year, or £3,600 gross (whichever is higher), even if you have unused Annual Allowance.
Full Definition
Net Relevant Earnings (NRE) is the measure of income used to cap the amount on which an individual can receive pension tax relief in any single tax year. Even if the Annual Allowance (currently £60,000) is higher, you cannot get tax relief on pension contributions that exceed 100% of your NRE for the year. What counts as NRE: employment income (salary, bonuses, taxable benefits), self-employment profits (after deducting losses and capital allowances), and certain furnished holiday letting income. What does not count as NRE: rental income from ordinary buy-to-let property, dividends, interest, or pension income already in payment. For people with little or no earned income — including children, non-working spouses, and those in drawdown — the minimum contribution eligible for tax relief is £3,600 gross per year (meaning £2,880 net paid in, with the scheme claiming £720 basic-rate relief). This makes SIPPs useful for non-earners. The carry-forward rules allow unused Annual Allowance from the previous three tax years to be added to the current year's allowance, but carry-forward does not increase the NRE cap. A person earning £20,000 can still only get tax relief on contributions up to £20,000, even if they have carry-forward that would allow £80,000 in Annual Allowance. Pension providers check the NRE limit; if contributions exceed it, HMRC can raise a charge. Careful planning is required when income varies year to year.