Should I reduce my salary sacrifice

huwy123

Hello,
I've received a one-off capital gain this year, and as I understand it (due to this gain) my pension relief limit will be 10k for the year due to tapering.
So far this year I have made salary sacrifice contributions of £7500, there have been employer contributions of £2200 and I have paid £3000 into a private (relief at source pension - £3750 after relief).
My questions are:-

1. As my combined contributions are already over 10k I assume there is no benefit continuning with the salary sacrifice for the next 2 months?
2. Can I use carry forward allowance to increase my pension relief limit to higher than 10k

Appreciate any advice on this.
H

DT2001

Have have a look at this link https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance#adjusted and see what should be included when calculating taper relief.
Then this link https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward if you only have £10k allowance. Hopefully they’ll make it clearer.

Dazed_and_C0nfused

So far this year I have made salary sacrifice contributions of £7500

No, you have agreed to a reduced salary in return for your employer contributing £7,500.

huwy123

DT2001 said:

Have have a look at this link https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance#adjusted and see what should be included when calculating taper relief.
Then this link https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward if you only have £10k allowance. Hopefully they’ll make it clearer.

Looking at the first link, it says "Your available annual allowance is your reduced annual allowance plus any unused allowance from the previous 3 tax years."
I understand that to mean that I can use the carry forward to increase my pension relief to be more than 10k. Therefore no need to chance the salary sacrifice.

bowlhead99

Yes, if you didn't use up all your annual allowance of the previous 3 years, the total allowance you have available for this year is whatever annual amount you get for this year (40k for most people down to 10k at max taper) plus whatever you didn't use in those previous years. 

When you do your self-assessment you don't need to tell HMRC you are using it - they should be able to figure out from their records that you have not broken the rules for what you contribute this year.  But you should keep records of what you have available to carry forward into future years so you don't accidentally go over the limit and cause a headache.

However, I don't see the relevance of your mentioning your receiving a one-off capital gain.

Capital gains don't affect how much income you make; gains are dealt with under capital gains tax regime while income and pensions contributions are dealt with under income tax.

Maybe you are just mentioning you have the gains in passing because it has caused you to have some spare cash sloshing about to be able to afford greater salary sacrifices or more pensions contributions. But if you are thinking that your success at making capital gains will increase your adjusted income and cause your allowance to taper, you can probably think again. As the gov.uk page about tapering allowance says, start with working out your net income for the year, then make adjustments etc. At no point does it say, "go and find out your capital gains figure and add that in too somewehere".

huwy123

Thanks bowlhead99 for your excellent response. I didn't realise capital gains do not effect income as you correctly guessed.