Basic or High Rate Tax Payer?

DonPatch

Hi

Could someone assist me please? Hope this is the right board to post on.

I now earn £44k a year and my bonus would be approximately £5k.
I am going to join a salary sacrifice scheme and pay 6% into my pension. My last company wasn't salary sacrifice and I received 20% tax relief on anything I paid in.

My questions are

1 Am I am basic or high rate tax payer?
2 Does this mean most of my bonus would be taxed higher than the rest and so 40% of it would be taken?
3. If I am high rate can I claim 40% tax relief on pension contributions?

I'm just a bit confused as I am basically a standard rate payer for most of the year?

Thanks for you help

Mahsroh

This is without seeing your tax code so not taking any unknown factors into account, but the threshold for 40% is £45,000.00.


If you've earned £44000 then you haven't quite hit the 40% bracket. The pensions (if I've interpreted what you've said correctly gets taken off your basic salary at 6%, so £2640. So you taxable pay is £41,360.


Your bonus of £5,000.00 would take your overall pay for the year to £46,360, so you'll pay 40% tax on the last £1,360.


So.....


£11,500 @ ZERO = 0.00
£33,500 @ 20% = £6,700.00
£1,360 @ 40% = £544.00
Total tax for the year £7,244.00


As I say, that's without seeing your tax code so doesn't take anything else into account such as benefits in kind.

DonPatch

Thank you.

Do you know if I could get 40% tax relief on my pension contributions?

Dazed_and_confused

In the example Mahsroh has outlined you have benefitted from 40% relief at source on your pension contributions.

Without these the taxable pay would have been £44,000 rather than £41,360 so there would have been an extra £2,640 taxed at 40% in the calculation.

DonPatch

Oh yes of course, I see that now.

The salary sacrifice element kept throwing me.

Thank you both for your help.

Mahsroh

Dazed_and_confused wrote: »

In the example Mahsroh has outlined you have benefitted from 40% relief at source on your pension contributions.

Without these the taxable pay would have been £44,000 rather than £41,360 so there would have been an extra £2,640 taxed at 40% in the calculation.

This.


Under the system you describe at your old company where you got 20% relief, you would have been taxed by HMRC on £49,000.00 including £5k bonus (with 20% relief on your pension payments being claimed by your pension provider on your behalf). In that example you could then claim the remaining 20% from HMRC, but the way your pension is deducted from your pay now, this happens automatically.