Paying into pension to reduce tax

sphrp2

I’m getting a pay rise soon and, as I’m hovering around the 20% / 40% threshold, I would increase my pension contributions if necessary to make sure I stay at 20% (for 2017/2018, this year is fine). I’ve done some calculations and I think my current level of contributions will keep me in the 20% bracket but I just wanted to run it past other people more knowledgeable in this area.

My gross salary will be £49300, and my pension contribution (happens at source, pre-tax) is 9%.

Thanks in advance for your help.

Dazed_and_confused

What about other income such as employer benefits (company car and the like) or savings interest?

sphrp2

No other benefits (aren't they mean?).
Forgot about interest, thanks for that. For the purpose of this calculation, let's assume zero interest (it's fairly minimal as all substantial savings in isas but I suspect it just might tip me over so BIG thanks for the heads up)

Linton

You are correct - for the 2017/2018 tax year your 9% pension will keep you just inside the basic rate band assuming you get the full tax allowance and have no other income.

sphrp2

That's great. Thanks for your help.
Now to tell my colleagues who didn't realise it was straightforward and earn myself a beer or two in gratitude! :beer:

jamesd

No reason to worry about going a bit over, after all it's only the bit over that is taxed at higher rate. Still, it is some wasted nice tax saving so best to pay in a bit too much rather than a bit too little.

sphrp2

Absolutely. It hardly needs to be to the penny! When I started looking into it, I thought I would be over by a fair bit but at that point i didn't really understand it. I get it now and, doing the maths, it's pretty close. I'm not going to calculate it to the n'th degree but I'd rather have the money in my pension than with hmrc

jdw2000

Hi all - How does this situation work if you do not have a work pension scheme?

ie: You're on £50K, and you want to keep below the higher tax level. But you are paying into a private pension AFTER you get taxed...


How does that work? How/when do you claim the tax money back?

xylophone

https://forums.moneysavingexpert.com/discussion/5612756