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  • FIRST POST
    • Atechnician
    • By Atechnician 14th Sep 17, 3:33 PM
    • 22Posts
    • 2Thanks
    Atechnician
    Moving to lower tax bracket
    • #1
    • 14th Sep 17, 3:33 PM
    Moving to lower tax bracket 14th Sep 17 at 3:33 PM
    I'm curious to know I heard that if you pay extra into for example your pension that gets deducted pre tax from net pay is it possible to move to a lower tax bracket

    For example I'm on 52k per year and uk gov website says above 45k is 40% tax and below 45k is 20% tax, if I was to set up to pay 7k into pension plan will it be classed as earning 45k and get taxed 20%?
Page 1
    • uknick
    • By uknick 14th Sep 17, 5:15 PM
    • 676 Posts
    • 302 Thanks
    uknick
    • #2
    • 14th Sep 17, 5:15 PM
    • #2
    • 14th Sep 17, 5:15 PM
    You can pay up to your annual salary into a pension, subject to a maximum of the annual allowance, currently £40k.

    https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/how-much-can-i-pay-into-a-pension

    So yes, you can drop to a lower tax rate if you reduce your taxable income by pension contributions.
    • purdyoaten2
    • By purdyoaten2 14th Sep 17, 6:17 PM
    • 659 Posts
    • 291 Thanks
    purdyoaten2
    • #3
    • 14th Sep 17, 6:17 PM
    • #3
    • 14th Sep 17, 6:17 PM
    I'm curious to know I heard that if you pay extra into for example your pension that gets deducted pre tax from net pay is it possible to move to a lower tax bracket

    For example I'm on 52k per year and uk gov website says above 45k is 40% tax and below 45k is 20% tax, if I was to set up to pay 7k into pension plan will it be classed as earning 45k and get taxed 20%?
    Originally posted by Atechnician
    You would only need to pay £5600 - which would be made up to £7000 by HMRC.
    purdyoaten lost his password
    • jem16
    • By jem16 14th Sep 17, 7:02 PM
    • 18,532 Posts
    • 11,322 Thanks
    jem16
    • #4
    • 14th Sep 17, 7:02 PM
    • #4
    • 14th Sep 17, 7:02 PM
    You would only need to pay £5600 - which would be made up to £7000 by HMRC.
    Originally posted by purdyoaten2
    That depends on the type of scheme. The Op seems to be talking about a pension paid pre tax from gross pay ( although does say net pay so clarification is needed ). If this is the case then £7k would be paid in and nothing would be made up by HMRC as less tax would be paid.
    • xylophone
    • By xylophone 14th Sep 17, 7:21 PM
    • 22,864 Posts
    • 13,222 Thanks
    xylophone
    • #5
    • 14th Sep 17, 7:21 PM
    • #5
    • 14th Sep 17, 7:21 PM
    https://www.aegon.co.uk/support/faq/pension-technical/Salary-sacrifice-higher-rate-tax.html

    may be worth a look.
    • Dazed and confused
    • By Dazed and confused 14th Sep 17, 7:21 PM
    • 1,691 Posts
    • 736 Thanks
    Dazed and confused
    • #6
    • 14th Sep 17, 7:21 PM
    • #6
    • 14th Sep 17, 7:21 PM
    The way the op worded the original question makes me wonder if they are under the, all too common, misapprehension that if you earn £52k you pay 40% on everything rather than just the bit over £45k (or £43k in Scotland)?
    • Atechnician
    • By Atechnician 14th Sep 17, 8:12 PM
    • 22 Posts
    • 2 Thanks
    Atechnician
    • #7
    • 14th Sep 17, 8:12 PM
    • #7
    • 14th Sep 17, 8:12 PM
    What information do you guys need? My money in split between salary and bonus which totals 55k actually when I worked it out. Which I'm gaurunteed and get every month. I currently pay 10% to pension a month and started a 10% discounted share scheme aswell so 20% of my month goes on that at the minute and was hoping if I increase my pension contribution to bring earnings to 45% that I would drop to 20% tax?

    Do I pay 40% on the whole amount or just on the amount over 45k?
    • Dazed and confused
    • By Dazed and confused 14th Sep 17, 8:25 PM
    • 1,691 Posts
    • 736 Thanks
    Dazed and confused
    • #8
    • 14th Sep 17, 8:25 PM
    • #8
    • 14th Sep 17, 8:25 PM
    In your position you would normally pay,

    nothing on the first £11,500
    20% on the next £33,500
    40% above £45,000

    Salary is irrelevant it is taxable pay which counts and this should be shown on your payslip. For example £55k salary with 10% company pension would commonly be £49.5k taxable pay so 40% tax is only being paid on £4.5k (or £6.5k in Scotland).

    Your personal circumstances might differ slightly but this gives the basic picture for most people.
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