Tax at 40%

caleytiff

Might be a bit of a dumb question but I will ask it anyway. I pay tax at 40% on £6500 and I currently save 8% of my work wages (£2880) into my pension. If I can afford it should I just put the whole £6500 into my pension to stop the taxman getting his hands on 40% of any of my pay. Do I need to do anything other than let my work know to put my pension contributions up, or do I need to tell the taxman (Does pension contributions affect your tax code?) Thanks any advice welcome

le_loup

You do not have to tell the tax man. Your employer will reduce tax you on the reduced pay that you receive. In other words, you tax will be based on the net after pension contributions.

CLAPTON

not enough information here

it depends

what sort of pension does your employer offer?

how much do your earn?

what are your present pension contributions?

caleytiff

Hi

I earn 37K from my job, 10k from my Armed forces pension and 2.5k is added to my tax bill for my company car. My company contributes 12% to my pension (not final salary, just a cashbuilder) and I currently add 8%. The way the taxman has worked it is I dont get any allowance (£7475) and everything gets taxed at 20% (works out the same I am told) I have a K74 tax code at the minute, which I believe they add £740 onto your income. My pension contributions come off my wages before it gets taxed. Thanks

CLAPTON

well based on your figures

your potential taxable income is
salary 37,000
benefit in kind (car) 2500
armed force 10,000
total 49,500
less your pension contribution 8% of 37000 = 2,960
so taxable pay is 46,540
40% tax starts at 42,475 so you should be taxed at 40% on £4,065
and you total tax bill should be about 8,628 (20% of 35000 plus 40% of 4,065)


with you current K code of K74 you are paying in total about 9912 in tax which is too much
it would seem to me your K code is incorrect; this could be for several reasons... it will be based on last years earnings, you may owe tax from last year too

presumably you have an explanation of how they arrive at the K code?

ceeforcat

Perhaps you clarify also what you mean by: 2.5k is added to my tax bill for my company car. Is this the additional tax or the value of the benefit?