Over £40K limit(no carry forward)

Tiggy777

Hi all


I have been saving into AVCs (Predential) for the pass 4 years for my pension ..paying in as much as I can through my salary (local government) in the run up to retiring.

This year I will go over the £40K limit with no carry forward allowances from the previous 3 years.

My question is .......do I just exceed it and keep going and if so what are the tax implications.

Would be grateful for any comments or advice on the best way forward.

Many thanks for your help and time

Regards

Tiggy

BoGoF

You will need to complete a Self Assessment Tax Return and declare what you have exceeded the annual allowance by. You will then pay back the tax relief.

Tiggy777

BoGoF wrote: »

You will need to complete a Self Assessment Tax Return and declare what you have exceeded the annual allowance by. You will then pay back the tax relief.

Many thanks for confirming...... take it it's just on the amount above the £40 limit ?


Thanks again

squirrelpie

The benefit of paying in to a pension rather than an ISA is the tax relief.


So if the tax relief isn't available, why not save the money into an ISA instead?

nigelbb

squirrelpie wrote: »

The benefit of paying in to a pension rather than an ISA is the tax relief.


So if the tax relief isn't available, why not save the money into an ISA instead?

25% Tax Free Lump Sum?

Thrugelmir

nigelbb wrote: »

25% Tax Free Lump Sum?

75% is potentially taxable.

lisyloo

As it’s only July and not very far from the tax year can you not reduce your contributions so you don’t exceed the limit?

Asghar

nigelbb wrote: »

25% Tax Free Lump Sum?

From an ISA you get 100% Tax Free Lump Sum.

lisyloo

Asghar wrote: »

From an ISA you get 100% Tax Free Lump Sum.

Only of net income (assuming earned income)

a basic rate taxpayer gets taxed 20% on the way in, plus 12% NI plus maybe 13.8% employers NI, so someone with a generous employer can get 45.8% uplift.

zagfles

lisyloo wrote: »

Only of net income (assuming earned income)

a basic rate taxpayer gets taxed 20% on the way in, plus 12% NI plus maybe 13.8% employers NI, so someone with a generous employer can get 45.8% uplift.

OP is local govt, pretty sure they don't do sal sac, it's net pay, so no NI saving at all. Exceeding the AA means getting taxed on the excess, effectively no tax relief going in but paying tax on 75% on the way out (assuming no spare personal allowance in retirement). So unlikely to be a good idea to exceed the AA unless getting extra employer conts, which probably doesn't apply here.

cisamcgu

If LGPS the AVC "pot" can be taken fully as TFLS provided it does not exceed 25% of the total pension. Maybe this is worth bearing in mind ?