Quick sanity check on my figures please

ss53

I will have no tax allowance for 2103 as above 116k income. However HMRC did not notify this to employer (I should have checked earlier) so PAYE has used a code giving full allowance. So I assume I will get bill of around 3.7 k when I complete 13/14 tax return. (40% of 9,440 ?)

If I contribute 12k to pension before year end. This will gross to a 16k contribution but will additionally allow me to claim back £4k on tax return to offset the 3.7 k bill.

Do these ball park figure look OK? Thanks

jem16

ss53 wrote: »

I will have no tax allowance for 2103 as above 116k income. However HMRC did not notify this to employer (I should have checked earlier) so PAYE has used a code giving full allowance.

Did you notify HMRC in the first place?

If I contribute 12k to pension before year end. This will gross to a 16k contribution but will additionally allow me to claim back £4k on tax return to offset the 3.7 k bill.

Do these ball park figure look OK? Thanks

The gross figure would need to be £16k, yes.

If it's paid from gross salary then £16k is what you would contribute.

If it's paid to a Personal Pension from net funds, then you should contribute £12,800. That would then be grossed up to £16k by the pension provider and you would then claim the other 20% (£3200) from HMRC.

ss53

No but I should have. I assumed they worked it out based on prior years in which case it should have been zero allowance. My own fault.


Thanks (yes it is from net salary to a SIPP)

jem16

ss53 wrote: »

No but I should have. I assumed they worked it out based on prior years in which case it should have been zero allowance. My own fault.

I believe they rely on you to inform them that your income is likely to be higher than £100k and they would presumably ask what it would be.

However if you would always intend to contribute to a pension to save losing the PA it would be better not to have the tax code changed.

Teeonethousand

I am also doing this for (obviously) the same reason. What is unclear from your post is your actaul earnings as you say above 116 but then say you will lose full allowance implying not exactly 116

I am contributing the number that it takes to bring my earnings to 100k - you need to do same if the 60% tax saving is your goal

ss53

Teeonethousand wrote: »

I am also doing this for (obviously) the same reason. What is unclear from your post is your actaul earnings as you say above 116 but then say you will lose full allowance implying not exactly 116

I am contributing the number that it takes to bring my earnings to 100k - you need to do same if the 60% tax saving is your goal

My aim isn't the 60% tax saving. I'm just trying to offset the underpayment in tax due to the incorrect use of full tax allowance in my PAYE. Purely so I don't have a payment to make through this years SA return. Unfortunately not feasible for me this year to make a pension contribution to take me to below 100k earnings.

jem16

ss53 wrote: »

Unfortunately not feasible for me this year to make a pension contribution to take me to below 100k earnings.

Unless you make a pension contribution before the end of this tax year, you will have an underpayment of tax due when completing your SA.

I thought that was the whole point of your first post? If it wasn't £16,000 would only give £3200 tax relief. How much above £100k would that still leave you?

ss53

jem16 wrote: »

Unless you make a pension contribution before the end of this tax year, you will have an underpayment of tax due when completing your SA.

I thought that was the whole point of your first post? If it wasn't £16,000 would only give £3200 tax relief. How much above £100k would that still leave you?

My monthly PAYE this year has been calculated assuming a full personal allowance. I understand that the allowance tapers to zero between 100k and 116k? So as my salary is above 116k, PAYE should have been calculated using zero allowance. As you say this will leave me with an underpayment in 2013/14 SA return.

So I am looking for the level of one-off pension contribution I need to make from net salary before the end of March to offset this underpayment. (I'm not trying to get my taxable salary down to the 100k level)

So personal allowance * 40% = underpayment

and this is the TAX return overpayment I am aiming to achieve with the one-off pension contribution to take it to zero,

jem16

ss53 wrote: »

So I am looking for the level of one-off pension contribution I need to make from net salary before the end of March to offset this underpayment. (I'm not trying to get my taxable salary down to the 100k level)

So personal allowance * 40% = underpayment

and this is the TAX return overpayment I am aiming to achieve with the one-off pension contribution to take it to zero,

The problem is that if the pension contribution takes you below £116k but still above £100k, you will only lose part of the allowance and not all of it which will obviously make a difference to the figures.

To give £3776 of tax relief you would need to be looking at a gross of £18,880 but that might be too much if it then brings you below £116k.

ss53

The additional contribution will not take me below 116k. I cant get to below 116k without making a more significant pension contribution than I can consider at the moment. So I'm not trying to regain any of the personal allowance. Just trying to offset my current underpayment.

jem16

ss53 wrote: »

The additional contribution will not take me below 116k. I cant get to below 116k without making a more significant pension contribution than I can consider at the moment. So I'm not trying to regain any of the personal allowance. Just trying to offset my current underpayment.

Well providing you're not above £150k, then a gross pension contribution of £18,880 would see £3776 tax relief which is 40% of £9440.

Net payment would have to be £15,104.