Considering transferring Investment money into Pension - is this wise?

JamTomorrow

jem16 wrote: »

That would only get you back £4400 so perhaps best not to tell HMRC to use that.

The reason for that is that you have allowed an allowance of £11,000 which at 40% tax would give you £4,400.

You need an allowance of £27,500 to give you back £11,000 at 40% tax so tax code is going to be 3790L.

Thanks again for your help here. I (obviously incorrectly) think of myself as being reasonably financially astute and still make schoolboy errors so dealing with matters like this must be extremely daunting for lots of people. Great that you take the time to help out.

I'll call HMRC this week armed with these details and hopefully they will arrive at a similar revised tax code.

A couple of further questions.

Is there an easy way of building in the extra tax I will need to pay on the dividend income into my tax code so that I don't have underpaid tax when I complete my self assessment?

Finally, at bonus time my company allows 'bonus waiver' so that my bonus can be paid directly into my pension. I suspect I will do this for the 16/17 tax year. Am i correct in assuming that this should pay the gross amount into my pension and avoid the complexity of the SIPP provider topping up by 20% and me getting the extra 20% back from the tax man? Also I think I read that there will be an NI saving to me of doing this - what is the % NI benefit I would get?

Thanks.

jem16

JamTomorrow wrote: »

I'll call HMRC this week armed with these details and hopefully they will arrive at a similar revised tax code.

Should be reasonably similar. Just make sure you use the taxable pay rather than gross pay and then try to tell them of all the other bits and pieces that come off as it may just confuse them.

Is there an easy way of building in the extra tax I will need to pay on the dividend income into my tax code so that I don't have underpaid tax when I complete my self assessment?

You can ask them to take the dividend income into account which will push that tax code down a wee bit.

However in your shoes I would pay an extra £2k approximately into the pension and avoid any need to pay that extra tax on the dividends.

Finally, at bonus time my company allows 'bonus waiver' so that my bonus can be paid directly into my pension. I suspect I will do this for the 16/17 tax year. Am i correct in assuming that this should pay the gross amount into my pension and avoid the complexity of the SIPP provider topping up by 20% and me getting the extra 20% back from the tax man?

Sounds like it should.

Also I think I read that there will be an NI saving to me of doing this - what is the % NI benefit I would get?

Thanks.

If it's done through Salary Sacrifice it would save NI but only around 2% if you're still a higher rate taxpayer. Not all schemes use Salary Sacrifice though so does yours?

JamTomorrow

Just spoke with an advisor at L&G to confirm how to go about making the one-off additional contribution and they said that L&G will add on 20% to whatever I send them, and not 20% of the gross pension as I was expecting.

Does that sound correct - anyone any experience of this?

Therefore if I want to make a £55k gross pension contribution then rather than sending L&G £44k as I had planned (80% of the gross £55k), I will need to send £45,833 instead, and recover £12,833 from the HMRC (rather than £11k as I had assumed).

Feels far more complicated than it needs to be and I'm not sure the advice I have been given is correct. When we make contributions of £240/month into my Wife's pension we get a £60 (25% uplift).

Should I speak to another advisor at L&G?

jem16

JamTomorrow wrote: »

Just spoke with an advisor at L&G to confirm how to go about making the one-off additional contribution and they said that L&G will add on 20% to whatever I send them, and not 20% of the gross pension as I was expecting.

Does that sound correct - anyone any experience of this?

Someone not knowing what they are talking about. To be precise L&G will add on 25% of what you actually contribute.

Therefore if I want to make a £55k gross pension contribution then rather than sending L&G £44k as I had planned (80% of the gross £55k), I will need to send £45,833 instead, and recover £12,833 from the HMRC (rather than £11k as I had assumed).

No you should make the £44k contribution. Tax relief will be applied correctly.

It's just someone at L&G who doesn't know how to correctly describe what happens.

JamTomorrow

jem16 wrote: »

They won't change it to what you tell them to. You give them the figures which they put into their computer. That then spits out the appropriate tax code



That would only get you back £4400 so perhaps best not to tell HMRC to use that.

The reason for that is that you have allowed an allowance of £11,000 which at 40% tax would give you £4,400.

You need an allowance of £27,500 to give you back £11,000 at 40% tax so tax code is going to be 3790L.

Thanks jem16.

Just spoke with HMRC and tax code changed by their calculations to 3790L