Pension contribution, income tax

cyclonico

Hello,

I'm looking for a sanity check, and making sure I did not miss anything.

I'm 40, and, due to personal circumstances, I am just starting to contribute into a pension fund. I'm currently a higher rate tax payer.

My plan is to increase the pot as much as possible through salary sacrifice (80%), while living off my savings, and paying as little income tax as possible. This should put my taxable income below the personal allowance threshold for the next tax year. My salary is under £110000 (I should be so lucky), and the pension contribution over 12 months will be under £40000.

Is that a good plan, or have I missed something?

Also, will that reduce the tax I am paying on saving interests down from 40% to 20%?

Nicholas.

gadgetmind

Depending on what hours you work, this could put you below national minimum wage, which you aren't allowed to do. NMW is currently £6.70 so you'd have to on not much more than a 30 hour week to get down close to personal allowance.

Other than that, it will work fine and you'll also be able to claim tax credits and other in work benefits.

bigadaj

Generally that should be ok supposing your company allow it.

You can't salary sacrifice below the minimum wage, so if you're full time you can only go down to about £14k.

Other points to consider are redundancy or other significant events which will mean this money is locked away for the next fifteen years, so you'd need more than the typical emergency fund potentially.

It should reduce the tax paid on your savings. And from next tax year there is the savings allowance which should be an additional benefit.

ffacoffipawb

bigadaj wrote: »

Generally that should be ok supposing your company allow it.

You can't salary sacrifice below the minimum wage, so if you're full time you can only go down to about £14k.

Other points to consider are redundancy or other significant events which will mean this money is locked away for the next fifteen years, so you'd need more than the typical emergency fund potentially.

It should reduce the tax paid on your savings. And from next tax year there is the savings allowance which should be an additional benefit.

If he is 40, it might be locked away for 17 years as the minimum retirement age goes up to 57 in around 12 years time (last year's pre election Budget).

However the legislation on that is yet to be passed I believe.