Adjusted income and threshold income / tapered tax relief

Mistermeaner

Trying to understand the tapering of tax relief and how threshold and adjusted income are calculated :

Assuming simple paye with only one job with a salary sacrifice into a dc scheme and no other income is the following correct :

Threshold income = Gross income on P60 + amounts sacrificed to dc

Adjusted income = Gross income on P60 + amounts sacrificed to dc + employer contributions to dc

E.g.

If p60 says gross income is 80k and I put 30k into my pension and my employer put 10k in :

My threshold income would be 110k, while my adjusted income would be 120k

Is my understanding correct ?


Also to be affected by the taper is it correct that ones threshold income must be more than 110 AND ones adjusted income must be more than 150? (Ie if only one condition is satisfied you are not subject to taper )


Thanks

Mistermeaner

bump

help please

HappyHarry

Mistermeaner wrote: »

Trying to understand the tapering of tax relief and how threshold and adjusted income are calculated :

Assuming simple paye with only one job with a salary sacrifice into a dc scheme and no other income is the following correct :

Threshold income = Gross income on P60 + amounts sacrificed to dc

Adjusted income = Gross income on P60 + amounts sacrificed to dc + employer contributions to dc

E.g.

If p60 says gross income is 80k and I put 30k into my pension and my employer put 10k in :

My threshold income would be 110k, while my adjusted income would be 120k

Is my understanding correct ?


Also to be affected by the taper is it correct that ones threshold income must be more than 110 AND ones adjusted income must be more than 150? (Ie if only one condition is satisfied you are not subject to taper )


Thanks

Your calculations are correct. Threshold income is £110k and adjusted income is £120k.



Yes, the tapered annual allowance only affects you if your threshold income exceeds £110k and your adjusted income exceeds £150k.

Mistermeaner

Hi

Re-reading this - I'm still not sure the above calculations are correct...

I have read the .gov site and numerous 3rd party articles that pop up when you google:

https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance


For someone like me with a single job, simple PAYE, no other sources of income or relief and a straight forward DC pension arrangement I understand:

Net Pay to be 'gross pay' as per my P60 - basically all of my taxable income for the year (so ignores anything paid into my pensions)

Threshold income to be 'Net Pay' as above LESS any one-off lump sum payments into my pension I might make that are subject to 'relief at source'

Adjusted income to my 'Net Pay' PLUS everything paid into my pension both by me as salary sacrifice and my employer top ups



So using the same numbers as orginal example:

If p60 says gross income is 80k and I put 30k into my pension and my employer put 10k in :

Net pay = £80K
Thresold income = £80K
Adjusted income = £120K

Or am i confused (again!)

Norwooder

Read this article

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/tapering-of-annual-allowance-for-high-incomes/

When you talk about salary sacrifice, are you sure that's what you mean?