Will I be taxed at 40% in this situation....

lisyloo

I need to know if I can subtract the pension contributions from the 43k gross income an therefore be left with some leeway left over to earn money

Does your employer operate a salary sacrifice scheme?
If they do then you simply put more into your pension e.g. £5K so you now receive £38K not £43K and hence don't get into the higher rate bracket.
If your employer doesn't operate salary sacrifice then you have to do a tax return at the end of the year to reclaim the higher rate tax. 20% will go into your pension automatically, the other 20% you'll have to claim back via a tax return and will go into your pocket (via a tax refund).
The pension scheme apply a blanket 20% because they don't know who's higher rate and who isn't so it's up to you to claim it back.

As long as your in a position to increase your pension contributions then you can avoid higher rate tax.

Also look at what you can deduct from your BTL income before "profit" e.g. repairs, maintenance, some interest etc. etc.

redux

Maybe you should be a bit more polite about that taxman, seeing as they are willing to effectively put money in your pension scheme, and for the 40% tax band cut your tax as well.

AlanP_2

redux wrote: »

Maybe you should be a bit more polite about that taxman, seeing as they are willing to effectively put money in your pension scheme, and for the 40% tax band cut your tax as well.

You'll be asking us to be polite about IFAs, Estate Agents, Bankers, Politicians, Gold Plated Pension Public Sector Workers and all the other "easy targets " next :beer:

mgdavid

AlanP wrote: »

You'll be asking us to be polite about IFAs, Estate Agents, Bankers, Politicians, Gold Plated Pension Public Sector Workers and all the other "easy targets " next :beer:

It costs nothing to be polite - but all those people can cost you money if you are rude to or about them.

thenap80

lisyloo wrote: »

Does your employer operate a salary sacrifice scheme?
If they do then you simply put more into your pension e.g. £5K so you now receive £38K not £43K and hence don't get into the higher rate bracket.
If your employer doesn't operate salary sacrifice then you have to do a tax return at the end of the year to reclaim the higher rate tax. 20% will go into your pension automatically, the other 20% you'll have to claim back via a tax return and will go into your pocket (via a tax refund).
The pension scheme apply a blanket 20% because they don't know who's higher rate and who isn't so it's up to you to claim it back.

As long as your in a position to increase your pension contributions then you can avoid higher rate tax.

Also look at what you can deduct from your BTL income before "profit" e.g. repairs, maintenance, some interest etc. etc.

I thought you didn't pay any tax on a pension - my understanding was they take off your pension contribution (in my case 14% I think - no salary sacrafice scheme as far as I know), and gthen the remaining money is taxed. Is this wrong then only you mention the pension getting taxed at 20%.

lisyloo

Depends how the employer does it (I'm referring to employee contributions).
If they are taken off BEFORE you are paid then there is no tax, no national insurance and no employers narional insurance either. Some employers will pass on all or some of their no savings. This is great because there are savings plus no need for a tax return.
If however your employer takes your pension AFTER you've been paid then the tax needs to be reclaimed. The pension scheme will reclaim 20% automatically for everyone, but won't deal with different individual tax rates. Then you need to claim back higher rate tax via your tax return.

If yours is taken off instead of you getting it as salary then that's called salary sacrifice.

jem16

lisyloo wrote: »

If they are taken off BEFORE you are paid then there is no tax, no national insurance and no employers narional insurance either. Some employers will pass on all or some of their no savings.

That's a Salary Sacrifice scheme you are describing.

However many company pension schemes also take contributions from gross pay so no tax as it reduces taxable pay but NI is still due on the gross amount.

lisyloo

Ok, thanks

atush

And you dont always have to do a SA form for your tax, you can just call HMRC and teel them abt your pension contributions and they will either refund you, or lower your tax code

jem16

atush wrote: »

you can just call HMRC and teel them abt your pension contributions and they will either refund you, or lower your tax code

Let's hope they don't lower the tax code as that would see more tax taken.