Paying Anything Over 37K InTo Pension

Joey122

I ve decided that I want to pay anything over 37K into my private pension through salary sacrifice.

I m told that my bonus can be paid in and that I get immediate 40% tax relief on this by the company I work for so I ll be doing this this year.

If I decide to pay the difference between my salary (50K), and 37 over the next three months, how do I get 40% relief ?

Do I have to fill in a tax return? If so will it be nosy / difficult to do?

What do people think about paying anything over 37 for the next twenty years and then waiting for a huge pension pot at 55? Seems sensible to me as you save 40% tax.

Am I missing something>?

Joey122

Finally on this point can i backdate some payments? ie: I want to invest ten k in a pension pot to reduce my last years tax liability

Is this allowed - How would it work

Thanks

jamesd

Joey122 wrote: »

I m told that my bonus can be paid in and that I get immediate 40% tax relief on this by the company I work for so I ll be doing this this year.

If the company pays the bonus in directly via salary sacrifice you don't get 40% added to it, you just don't get tax and NI deducted from it.

Joey122 wrote: »

If I decide to pay the difference between my salary (50K), and 37 over the next three months, how do I get 40% relief ?

If it is done by salary sacrifice you don't do anything to get it. You just don't pay tax and neither you nor the employer pays NI. It's common to agree to split the gain from not having to pay the employer NI between employer and employee, though not universal. That's because the employee only saves NI at the 1% rate at your income level. With 12.5k of gross salary due over the next three months and 13k of planned pension contributions you'd receive no salary directly to you for the three months.

Joey122 wrote: »

Do I have to fill in a tax return? If so will it be nosy / difficult to do?

See Do you need to fill in a tax return?

Joey122 wrote: »

What do people think about paying anything over 37 for the next twenty years and then waiting for a huge pension pot at 55? Seems sensible to me as you save 40% tax.

You'll be able to take up to 25% as a tax free lump sum unless the rules change. Then you could use income drawdown or buy an annuity.

Joey122 wrote: »

Am I missing something>?

Maybe the taxable nature of the pension income once you start to receive it. Also the way much of it is locked up in the pension, while say a stocks and shares ISA is 100% available to you at any time and paid tax free. But the investments are after tax. So it's more tax efficient to use the pension down to the higher rate tax threshold, then for the basic rate tax region it might be better to use S&S ISA investing to give you a mixture of maximum tax benefit from the pension and maximum flexibility from the ISA.

This is even more true this year when there's still a 1% NI band between the NI UEL and the start of higher rate tax, so the benefit of no NI on salary sacrifice pension contributions is reduced compared to next year.

Joey122 wrote: »

Finally on this point can i backdate some payments? ie: I want to invest ten k in a pension pot to reduce my last years tax liability

You can't do this any more. Was eliminated a couple of years ago.