Increase an AVC?

Hillsideview

I have been adding £350 per month to an AVC with the Pru. Every article I see tells me that if I am paying 40% tax thus I get 40% relief. However, I am sure the amount I am being taxed 40% on is small - maybe £3000 at the most.
The question is - should I increase my AVC from 350 to £400 per month, or to what I can afford? I simply cannot work out if/how I can make use of the higher tax rate that is being taken from only a small amount.
I have my main salary plus another employment both of which result in considerable fluctuations in tax relief: in 18 months it has gone from 980L to (currently) 688L and soon to be 1000L
My main employment pension plus the AVC means that my monthly pension outgoings are 660 per month.
As far as I can ascertain, pension tax 'relief' is done by interaction between Pension provider and HMRC - I think!
I dont mind another phone call to HMRC who are always very helpful.
Comments would be greatly appreciated.

kidmugsy

Hillsideview wrote: »

I have been adding £350 per month to an AVC with the Pru. Every article I see tells me that if I am paying 40% tax thus I get 40% relief. However, I am sure the amount I am being taxed 40% on is small - maybe £3000 at the most. .

Then the most you get 40% relief on is £3k.

bigadaj

Hillsideview wrote: »

I have been adding £350 per month to an AVC with the Pru. Every article I see tells me that if I am paying 40% tax thus I get 40% relief. However, I am sure the amount I am being taxed 40% on is small - maybe £3000 at the most.
The question is - should I increase my AVC from 350 to £400 per month, or to what I can afford? I simply cannot work out if/how I can make use of the higher tax rate that is being taken from only a small amount.
I have my main salary plus another employment both of which result in considerable fluctuations in tax relief: in 18 months it has gone from 980L to (currently) 688L and soon to be 1000L
My main employment pension plus the AVC means that my monthly pension outgoings are 660 per month.
As far as I can ascertain, pension tax 'relief' is done by interaction between Pension provider and HMRC - I think!
I dont mind another phone call to HMRC who are always very helpful.
Comments would be greatly appreciated.

You need to be careful when you are at the edge of tax bands and having more than one employer makes this more difficult. If the pension comes out of your gross salary from one employer then you'll normally get the higher rate tax relief automatically, in your case you would certainly need to check your tax figures to see if you are getting it and may have to complete a self assessment form to make sure you do. This can often be sorted by a simple letter but your circumstances seem a bit more complex.

kidmugsy

bigadaj wrote: »

You need to be careful when you are at the edge of tax bands and having more than one employer makes this more difficult.

That makes me wonder whether it might make for more convenience to stop contributing to the AVC and start a personal pension instead?

taktikback

depends if that AVC can be taken as 100% tax free as it potentially can be with the LGPS....in that case pumping in contributions up to 25% of the notional value of the LGPS is the best way forward as long as you are prepared to wait until you take the pension from the main scheme...