Pension tax question and AVCs

scg1889

Hi,
A pretty basic question around pensions and tax. I'm a 40% tax payer in a company pension and my pension is deducted from my payslip before tax. When I retire I very much doubt i'll be in that tax bracket so if I make AVCs now and thus avoid paying 40% tax on those contributions will I still only pay 25% tax on the pension income i receive even though I've "avoided" paying 40% tax now?

hope that makes sense and thanks in advance

MallyGirl

yes - once it is in there in 'gross' form you can get it out subject to the taxation of the time. 25% of withdrawal tax free (unless you have already taken a lump sum) and then the £11k allowance will be applied to the remaining 75% so some will be tax free and some taxed at 20%. No NI on pension income wither so if you are salary sacrificing you win there too

Marcon

scg1889 wrote: »

Hi,
A pretty basic question around pensions and tax. I'm a 40% tax payer in a company pension and my pension is deducted from my payslip before tax. When I retire I very much doubt i'll be in that tax bracket so if I make AVCs now and thus avoid paying 40% tax on those contributions will I still only pay 25% tax on the pension income i receive even though I've "avoided" paying 40% tax now?

You'll be taxed at your marginal rate, so if you are not a higher rate taxpayer (and assuming tax rates don't change!), the tax will be 20%, not 25%.