higher rate rtax

dd95

seen various posts on here regarding higher rate tax payers should prioritise pension payments - why is this?

i currently pay 5% of my salary per month in my pension with employer contributing 4% - i know there is a minimum they have to contribute, but is there a maximum? should i look to increase my 5% then?

xylophone

https://www.litrg.org.uk/latest-news/news/181214-do-you-understand-how-tax-relief-your-pension-contributions-works

Alistair31

dd95 wrote: »

seen various posts on here regarding higher rate tax payers should prioritise pension payments - why is this?

i currently pay 5% of my salary per month in my pension with employer contributing 4% - i know there is a minimum they have to contribute, but is there a maximum? should i look to increase my 5% then?

Are you a higher rate tax payer ?

EDIT:
Why another thread just four days after the last you started on the same subject ?
https://forums.moneysavingexpert.com/discussion/6089193/higher-rate-taxpayer

Dazed_and_confused

seen various posts on here regarding higher rate tax payers should prioritise pension payments - why is this?

Priority would depend on what it is being judged against. You wouldn't make sure of benefitting from higher rate tax relief at the cost of being evicted for not paying your mortgage.

But the basic principle is that higher rate payers can benefit more from pension contributions. There are multiple methods of contributing but a common one is relief at source.

So say you contributed £1,000. The pension company, courtesy of HMRC, would add 25% giving you a pension fund of £1,250.

And your basic rate tax band is increased by £1,250 so you could end up paying more 20% tax and less 40% tax (different rates apply if Scottish resident for tax purposes). Potentially savings you £250 in personal income tax (£1,250 x 20%).

So that £1,250 pension fund has really only cost you £750.

In niche situations such as adjusted net income > £100k (loss of Personal Allowance) and High Income Child Benefit Charge cases the personal tax benefit can be even more. 60%+.