Annual pension contribution question

John_Nimi

Hi,

Bee trying to wrap my head around the Pensions and Income tax brackets above the 150k limit. I see that the annual limit is 40k for contributions to pension. If I understand correctly for income lower than 150k we could contribute 40k to a pension (like a workplace pension) and then regain some of the personal allowances (for e.g. if income were 140k - 40k contribution then we get back the entire personal allowance).

But say I had a carry over of 20k from the previous years unused pension contribution and an income of 160k. Could I then contribute 60k (40k + 20k) and still regain the entire personal allowance. Or does the fact that I'm over the 150k income limit mean this does not work out as simply as this?

(any tips / help on how to calculate the pension contribution stuff in general would be much appreciated as well :wall: )

DT2001

https://www.youinvest.co.uk/sites/default/files/AJBYI_Guide_to_annual_allowance_tapering.pdf

Looks as if it could answer your questions and has worked examples

John_Nimi

DT2001 wrote: »

https://www.youinvest.co.uk/sites/default/files/AJBYI_Guide_to_annual_allowance_tapering.pdf

Looks as if it could answer your questions and has worked examples

Thanks for sharing this.

Did not realise employer contributions add to your income, so the adjusted income is total income + employer pension contribution - personal pension contributions :think:

John_Nimi

Could you please let me know if this calculation is correct (in light of the above):

Total Income = 160,000
Employer pension contribution (at 5%) = 8000
Pension contribution = 60000 (i.e. with 40,000 current year + 20,000 carry over)
Which gives,
adjusted income = 168,000
threshold income = 108,000 (168,000 - 60000)

Therefore no tapering of pension allowance.

And the total deductions for the year = 33,464.16 (i.e. 27,500 income tax + 5964.16 NI)
So net income = 66,535.84 (i.e. 160,000 - 60,000 - 33,464.16)