Query on tax code for pension

TonyM19

Hi

I'm a teacher who has just taken phased retirement. My salary until September + my monthly pension payment will put my gross earnings at £47k (will be below £43k from September). I'm still paying 10.2% pension contributions. My tax code for my pension is D0 ie I'm paying 40% on all of it. It's 1100L on my main job.

Does that sound about right? I was expecting to pay 40% on some of it, but not all of it.

Thanks

Silvertabby

This is a temporary code pending confirmation of your actual tax code from HMRC. I take it that you have spoken to HMRC about your change in circumstances?

neilvw

How much is the salary after your pension contributions (before and after September 2017)?

How much is the pension?

TonyM19

Silvertabby wrote: »

This is a temporary code pending confirmation of your actual tax code from HMRC. I take it that you have spoken to HMRC about your change in circumstances?

Not yet. Just got the new code this evening. Just checking to see if I have a case to use when I call them

TonyM19

neilvw wrote: »

How much is the salary after your pension contributions (before and after September 2017)?

How much is the pension?

Until September

42650 salary + 4350 pension

After September

38250 + 4350

neilvw

So your salary, until September, is within £350 of the higher-rate threshold (£43,000). So taxing all the pension at 40% isn't far out; they will owe you a small amount of tax back. I guess you just need to let them know the date of salary change and they will issue a more appropriate code to the pension provider at that time?

jamesd

Assuming you're close to or older than 55 you should consider contributing the remainder of your gross pay for each tax year into a personal pension. From age 55 25% of this can be taken as a tax free lump sum, saving you considerable income tax. Best not to take anything from the remaining taxable 75% until no longer working much since doing so reduces your annual contribution limit for personal pensions to £4,000 a year.

TonyM19

neilvw wrote: »

So your salary, until September, is within £350 of the higher-rate threshold (£43,000). So taxing all the pension at 40% isn't far out; they will owe you a small amount of tax back. I guess you just need to let them know the date of salary change and they will issue a more appropriate code to the pension provider at that time?

How does tax relief on the payments I make into my pension work? If I'm paying just over 10% of my salary into my teacher's pension scheme is that taken into account when calculating my taxable pay?

Should I expect to pay at 20% from September - is that a reasonable assumotion?

neilvw

The Teachers' Pensions scheme is a 'relief under net pay' arrangement. That means your pension contribution is deducted from your salary before income tax is applied. The tax relief is therefore applied automatically. It reduces your taxable pay for income tax purposes. It doesn't, however, reduce the earnings that are subject to NI (unlike salary sacrifice arrangements).

Is the £42,650 before your 10.2% pension contribution?

Dazed_and_confused

Your payslip should show the taxable salary I.e amount after pension contribution which attracts tax relief, which is the amount relevant to calculate your tax code.

Your easiest option would be to calculate the taxable pay you expect for the forthcoming tax year and then go onto your personal tax account and update that to show what you expect to receive in the year to April 2018 and the HMRC will then send you a new code if necessary

TonyM19

neilvw wrote: »

The Teachers' Pensions scheme is a 'relief under net pay' arrangement. That means your pension contribution is deducted from your salary before income tax is applied. The tax relief is therefore applied automatically. It reduces your taxable pay for income tax purposes. It doesn't, however, reduce the earnings that are subject to NI (unlike salary sacrifice arrangements).

Is the £42,650 before your 10.2% pension contribution?

Before pension contribution