Pension contribution to lower tax liability

Dazed_and_confused

Where are you getting the £57k figure from?

weimo

59k - 2k div allowance.....

Dazed_and_confused

There is no "allowance" for dividends.

Without a pension contribution your £59,000 would be taxed as follows

Personal Allowance £12,500 - no tax

Leaves £46,500 to be taxed.

£37,500 x 20% (basic rate)
£4,000 x 40% (higher rate)
£2,000 x 0% (dividend nil rate, using some of the higher rate tax band)
£3,000 x 32.5% (dividend higher rate)

If you make a gross relief at source contribution of £7.5k the £59,000 would be taxed,

Personal Allowance £12,500 - no tax

Leaves £46,500 to be taxed

£41,500 x 20% (basic rate)
£2,000 x 0% (dividend nil rate using up some of the basic rate band)
£1,500 x 7.5% (dividend basic/lower rate using up the rest of the basic rate band)
£1,500 x 32.5% (dividend higher rate)

cloud_dog

Is the OP able to get the investments in to an S&S ISA account or have you already used your allowance, or is the investment not listed on recognised exchanges, i.e. private company divis?

weimo

OK so under your example I would need to increase to over 9k (9.5k to be clear) to keep at basic rate in all areas, income & div.

I appreciate your patience with me here.

weimo

cloud_dog wrote: »

Is the OP able to get the investments in to an S&S ISA account or have you already used your allowance, or is the investment not listed on recognised exchanges, i.e. private company divis?

Allowance already consumed. Thanks for the suggestion.

Dazed_and_confused

OK so under your example I would need to increase to over 9k (9.5k to be clear) to keep at basic rate in all areas, income & div.

Yes. But if you have missed our any taxable income such as savings interest* then remember that will also use up some of your basic rate tax band even if actually taxed at 0%

* there is no allowance for interest either

weimo

Dazed_and_confused wrote: »

Yes. But if you have missed our any taxable income such as savings interest* then remember that will also use up some of your basic rate tax band even if actually taxed at 0%

* there is no allowance for interest either

Yes I did think of that, and probably need to go through everything to ensure I have covered all.

I think it will be very tight with the time remaining as to whether there is actually enough left to live on if I have to spread 10k (if I missed any interest etc) essentially over 4 months.

Dazed_and_confused

Don't forget, there's nothing wrong with paying a bit of higher rate tax, it all helps keep the country running

weimo

Dazed_and_confused wrote: »

Don't forget, there's nothing wrong with paying a bit of higher rate tax, it all helps keep the country running

You are right there.......I'm in two minds here, if its worth all the number crunching and going all 'beans on toast' for 4 months to save a few quid in tax.

I appreciate your time explaining this to me - Thank you.