Using pension contribution to offset annual income

iceman101

I'm a non-taxpayer and will be quitting my job next month. I will earn 2k salary for this tax year, but have investment returns which could take my annual income above 17k.

Under the new savings rules, I've read annual income (salary and investment returns) below 17k threshold is not taxable.

If I make a maximum allowable personal pension contribution of £2800 (net) into my pension, can this contribution be used to offset the value of my annual income, to keep my annual income below the 17k taxable threshold?

green_man

It won't quite work like that as you will not (I assume) be making pension contributions gross from your salary. However the effect will be the same, the 2880 will be grossed up standard tax rate thus increasing the amount in the pension. I believe you can still in fact get this extra tax relief even if you are earning less than £17k and thus paying no tax.

zagfles

If it's to a RAS (relief at source) scheme eg a personal pension then your contributions won't reduce your taxable income. You will get basic rate relief reclaimed by the pension provider even if you don't pay any tax. But for the purposes of the nil rate band for savings, your pension contributions won't reduce your income

(There is the concept of "adjusted net income" which is used for stuff like age related allowances, child ben tax, and the £100k+ personal allowance withdrawal, but it looks like it doesn't apply to the nil rate savings band).

Dazed_and_confused

iceman101 wrote: »

I'm a non-taxpayer and will be quitting my job next month. I will earn 2k salary for this tax year, but have investment returns which could take my annual income above 17k.

Under the new savings rules, I've read annual income (salary and investment returns) below 17k threshold is not taxable.

If I make a maximum allowable personal pension contribution of £2800 (net) into my pension, can this contribution be used to offset the value of my annual income, to keep my annual income below the 17k taxable threshold?

It isn't alwaya true that you can have annual income (salary and investment returns) below 17k and not pay tax.

I will earn around £15k from my job this year and hope to get a few hundred pounds savings interest during the year and have no other income but am still having to pay tax on my wages.

I have though had my first interest payment without the bank keeping some tax and that is a welcome little bonus :T

iceman101

Dazed_and_confused wrote: »

It isn't alwaya true that you can have annual income (salary and investment returns) below 17k and not pay tax.

I will earn around £15k from my job this year and hope to get a few hundred pounds savings interest during the year and have no other income but am still having to pay tax on my wages.

I have though had my first interest payment without the bank keeping some tax and that is a welcome little bonus :T

I agree, but in my circumstances income from my job will only be 2k so tax exempt, but my savings return will push my income above 17k, so I was hoping to reduce my annual income by making a pension contribution.