AVC options & income from non-PAYE sources, e.g. share dividends, etc.

As a member of an occupation pension scheme I am contributing maximum AVC's via the payroll.

I am now doing a tax return for 2005 and with a view to minimizing the tax amount, am considering opening an independent pension account to which I can contribute 30% of the gross income from non-PAYE sources, e.g. share dividends, etc. This is the maximum AVC contribution at age over 50. This should enable me to claim back 42% of the tax paid on the 30% of applicable "income".

Am I correct in this assumption and what type of pension fund do I need to open and how do I actually claim the tax back? Any comments greatly appreciated.

Re: AVC options

You can only make tax relievable pension contributions on "Earned Income"...Rental Income, Dividend Income - both of these are "Passive Income" so they are not pensionable.

Sorry to have a negative reply - it might save you some head scratching though!

I'm a bit confused - I was referring to dividend income, which is I imagine is not "passive". What, exactly, does "passive" mean in this context? Thanks.

It means that you do not have to work for it - such as rental income and dividend income.
They are both forms of income that accrue from ownership of an asset - rather than from pensionable employment.

Does that mean that a (theoretical) person whose only income is derived from share dividends cannot take out a pension and obtain tax relief - even though he/she has paid tax on that "income"?

Such a person would set up a company to receive the dividends, make themselves an employee of the company, pay themselves a salary and contribute to a pension based on the salary being paid.

But if, as you suggest, there is no company and no salary - then there would be no scope to pension fund.