Redundancy and pension help and avoiding tax

kidmugsy

kevkj wrote: »

Kidmugsy Thanks for info i pay 9% into my pension and employer pays 10%. So after 10 months of payments maybe around 8k has been paid this tax year into my works pension.I am paying the £ into my contracted out fund i have had since mid 80s as i can take 25% of this fund next year at 55. Thanks for help all sorry if i am confusing.

When you calculate how much you want to pay to your provider remember to subtract the gross amount you will already have paid in from the £27,150; ignore the amount your employer will have contributed.

kevkj

Gents to work out the gross payment from the net .Do you always times the gross payment by 0.8.


I am now thinking of making a gross payment of £30,000 would this be a net payment to my pension provider of £24,000 ie 30000x0.8 =24000.

kevkj

tacpot12 wrote: »

They (or rather your employer) will automatically know to make £30,000 tax free, so you will be taxed as if you had earned £72,150 or thereabouts. So you will pay some tax at 40%, but will be able to reclaim some of this back via your self assessment return, if you make a large payment into your pension.

If you pay £30,000 into your pension, the pension scheme will claim 20% of the payment you make as tax relief and pay this into your pension, so your pension's value will go up by £30000 * 100 / 80 or £37,500.

You will pay £17,500 in tax and £5000 in NI on an income of £72150. This will leave you with about £49,650 of income after tax. However this is made up of the £33,800 (less tax and NI) that you're already earned this year) and the PILON and any taxable element of the redundancy payment. So I would expect you final payment to be £30000 of tax free redundancy plus about £23000 of taxed income (after tax), so about £53,000.

Hope this makes sense. I've just been plugging your numbers into the tax calculator at https://listentotaxman.com/33800

Thanks understanding all this.

kidmugsy

kevkj wrote: »

Gents to work out the gross payment from the net .Do you always times the gross payment by 0.8.


I am now thinking of making a gross payment of £30,000 would this be a net payment to my pension provider of £24,000 ie 30000x0.8 =24000.

Yes, that's it. (As long as the basic rate of income tax remains at 20%.)