Earning over 100k and withdrawal of personal allowance

Mistermeaner

Hi

I've never earned over 100k of taxable income as despite coming close last few years my salary sacrifice has always kept below. As such i have always had the full annual allowance and started this tax year with code 1150 (or whatever the max is this year)

I've been fortunate enough to get some good bonuses this year and despite Sal sac will earn pre tax income of greater than 100k

HMRC have written to me stating tax code will change next year to allow for this with personal allowance withdrawn ; they said tbc but code will be 250XT . I've checked my personal tax thing on government gateway and on that this year's tax code has also changed to 500XT

now I think the XT means provisional / subject to review and thanks to advice on here i need to do self assessment for first time so I have registered for that today

I am hoping to be able to make lump sum payments into my dc pension in next few weeks that will reduce my taxable income below 100k (using carry forward annual allowance from 3 years ago)I

I guess my question in a nutshell is that if I make lump sum payments such that my P60 gross LESS pension lump sums is sub 100k (calculated by self assessment) then will i retain my full personal allowance for both this tax year and next ?

Follow up question ; next tax year it is unlikely i will exceed 100k (business performance bad) so will i still need to self assess ?

I was slightly confused when registering for self assessment that there was no option about which year I was registering for .... I presume registering now is to self assess for year 18/19 ?


Thanks

Dazed_and_confused

I guess my question in a nutshell is that if I make lump sum payments such that my P60 gross LESS pension lump sums is sub 100k (calculated by self assessment) then will i retain my full personal allowance for both this tax year and next ?

No. Each year is looked at independently. So contributing this tax year won't ultimately have any impact on the next tax year other than that HMRC may calculate your tax code using certain assumptions.

Such as your taxable salary may be only say £99k and this could result in full Personal Allowance being due. But if the reality is that your income is higher in 2019:20 then the Personal Allowance wouldn't be due and you could have a large Self Assessment bill to pay.

Remember your tax code is just a provisional attempt to collect the correct amount of tax. Your Self Assessment establishes the actual tax payable (or refundable) and takes into account tax paid during the year under PAYE.

You may find it simplest to file a return each year, especially of you have pension tax relief to claim (separate to salary sacrifice which isn't something you can claim for as it is your employer making the pension contribution - you benefit by having the lower taxable income (P60 value).

You should Google "adjusted net income" as this is ultimately what matters with income over £100k and reduced Personal Allowance.

kuratowski

Yes it is possible to get back your personal allowance in this way.

Also note that you if your income / allowances vary greatly from one year to the next, you can adjust your figures for next year using your personal tax account.