Tax relief question-can you answer it??!!

simonhgreen

Hi all

My salary has recently gone up to just over the 40% income tax level. I have been paying AVCs for some time.

Will I now get 40% tax relief on all my future contributions, or will it only be on the small amount between the 40% limit & my new salary?

Any advice gratefully received


Thanks

Chrismaths

You get 40% relief only on the slice of income that pays 40% tax. You automatically get basic rate relief paid into your pension, and you reclaim the extra 18% by filling in a tax return.
HTH, Chris

dunstonh

AVCs have the tax relief handled via your payslip so no further action should be required. FSAVCs and personal pensions need you to claim the extra back on your tax return.

david78

You first need to check that you really are paying 40% tax on your earnings. You need to subtract your personal allowances and the amount you pay into your company scheme from your salary. This figure is your taxable amount.

If whatever is left is above the limit for 40% tax then you will get tax relief on additional pension contributions. However, each payment made reduces your taxable amount further, and once it reduces below the 40% tax level, you will only get tax relief at the basic rate (22%) on future contributions. Payments into AVCs are made gross, payments to FSAVCs and all forms of Personal Pensions are made net of basic rate tax.