Higher Tax Band & Pension Contributions

modelworker

Hi everyone. I'm 49 and being made redundant soon & have been lucky enough to get another job. I have been with my current employer 22 years and am in the fortunate position of a decent payout (should just about cover endowment & ISA mortgage shortfalls) By my calculations, my taxable pay for 2009/2010 will push me into the 40% band by approx £5000. My current employer offers pension augmentation as a way of reducing the tax burden, so i could put the £5000 straight into the pension pot (not sure if i get tax relief on this). Alternatively, could I simply sit back wait till the end of the 2009/10 tax year, calculate how much is liable for 40% and put this amount into a pension fund of my own choice and receive the tax relief @ 20%. ?

Any help/advice gratefully received

mr_fishbulb

modelworker wrote: »

My current employer offers pension augmentation as a way of reducing the tax burden, so i could put the £5000 straight into the pension pot (not sure if i get tax relief on this).

Don't think you will get tax relief as in the eyes of HMRC it won't be you contributing this, it will be your employer. Works like a salary sacrifice if I understand it right.

zygurat789

mr_fishbulb wrote: »

Don't think you will get tax relief as in the eyes of HMRC it won't be you contributing this, it will be your employer. Works like a salary sacrifice if I understand it right.

Which means he will be taxed on £5,000 less - sorted.
If you persue the second route you will only pay 80% of the premium, receive a receipt for the total premium which you use to get 20% tax rebate.

CLAPTON

modelworker wrote: »

Hi everyone. I'm 49 and being made redundant soon & have been lucky enough to get another job. I have been with my current employer 22 years and am in the fortunate position of a decent payout (should just about cover endowment & ISA mortgage shortfalls) By my calculations, my taxable pay for 2009/2010 will push me into the 40% band by approx £5000. My current employer offers pension augmentation as a way of reducing the tax burden, so i could put the £5000 straight into the pension pot (not sure if i get tax relief on this). Alternatively, could I simply sit back wait till the end of the 2009/10 tax year, calculate how much is liable for 40% and put this amount into a pension fund of my own choice and receive the tax relief @ 20%. ?

Any help/advice gratefully received

well

If you have 5000 that is liable for 40% tax, then yes, if you put it in a pension fund in the 2009/2010 you will receive tax relief.

the current limit is 43,875 before 40% tax is applied to the amount above that.

if you are putting it into your occupational scheme then you just pay in 5,000 and you will receive the tax relief at source

if you are puttting it into a private scheme out of taxed income then the amounts you need to out in is different.