Tax relief on pension contributions.

aj9648

jamesd wrote: »

No inherent need for a tax return. You can use your online Personal Tax Account to tell HMRC about your expected income and pension contributions whenever you like. They will adjust your tax code to give you the higher rate relief as part of that. Doesn't have to be perfect when estimating. Tell them the actual numbers by letter, phone or message when you know them and they will adjust your tax code to refund or collect any shortfall.

Looked in my personal tax ac page but didn't see anything. I'll ring them up

kidmugsy

JOHN232 wrote: »

I take it that my occupational pension does count as 'earnings' for this purpose?

I think you've missed out a "not". Pension income is not part of "earnings".

kidmugsy

JOHN232 wrote: »

I am in receipt of an occupational pension of £21000 a year.
In this current tax year, 2016-2017 I have earned an additional £45000.

...I owe the additional 20% on all earnings over £43000.

... by the end of the tax year will have made approx.£4000 of contributions.

Taxable income = £21,000 + £45,000 = £66,000.

Subtract higher rate threshold (£43,000) and current pension contributions (£4,000) => £19,000 exposed to higher rate income tax.

Borrow and contribute to personal pension (of some kind) 0.8 x £19,000 = £15,200. Higher rate tax is thus avoided.