Does increasing pension contributions avoid tax?

Cam93

as the title,
My company dont offer salary sacrifice, and I'm just into the 40% bracket. Would increasing my contributions to 10% avoid HRT as it should give me NET salary below 50k?

If not, what other choices do I have to avoid 40% tax?

Mr.Saver

Yes, if you earn a net salary above 50k, salary sacrifice almost certainly can help you reduce the amount of income tax (and NICs) you need to pay. To work out the exact number, you will need to know your other taxable incomes and tax reliefs too.
But to keep it simple, if you don't have much taxable income from other sources (property rental income, savings interest, dividends from company shares, benefits you get from your job, etc.), and your net salary after salary sacrifice is below 50k, you should be fine.
If you want to learn more about the rules, you can read more at https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
and https://www.gov.uk/guidance/adjusted-net-income

lisyloo

Yes but you’ll have to claim it back.
your pension scheme will automatically claim back basic rate tax.
Assuming your affairs are simple then at the end of the tax year you need to write to your tax office after the end of the tax year (about now after getting P60) and claim back the higher rate tax.
note this will go back into your pocket not into your pension.
you MAY be able to sign up fo self assessment and do it online or you could phone or write to your tax office,
i believe they now have user forums which might help
but basically you’ll need to pay it and then get it back (to your pocket not your pension).
you might want to suggest salary sacrifice to your employer as they can save money too so it’s a win win. I’ve done this before.

xylophone

Is tax relief on your workplace pension given through "net pay" or "relief at source"?
https://www.nowpensions.com/help-centre/faqs/general-information/whats-the-difference-between-net-pay-and-relief-at-source

Mr.Saver

lisyloo said:

Yes but you’ll have to claim it back.
your pension scheme will automatically claim back basic rate tax.
Assuming your affairs are simple then at the end of the tax year you need to write to your tax office after the end of the tax year (about now after getting P60) and claim back the higher rate tax.
note this will go back into your pocket not into your pension.
you MAY be able to sign up fo self assessment and do it online or you could phone or write to your tax office,
i believe they now have user forums which might help
but basically you’ll need to pay it and then get it back (to your pocket not your pension).
you might want to suggest salary sacrifice to your employer as they can save money too so it’s a win win. I’ve done this before.

That is not accurate. By using a salary sacrifice schema, the pre-tax income is paid into a pension, without deducting the income tax and NICs, therefore the employee who made the pension contribution does not need to contact the HMRC and claim tax relief on it.

Mr.Saver

xylophone said:

Is tax relief on your workplace pension given through "net pay" or "relief at source"?
https://www.nowpensions.com/help-centre/faqs/general-information/whats-the-difference-between-net-pay-and-relief-at-source

Does it matter if salary sacrifice is used? That's pre-tax income paid directly into the pension by the employer, the income is not taxed, so the employee will not get tax relief on it.
Edit: oops, sorry, I missed this "My company dont offer salary sacrifice". Please ignore my comment.

burner01

Mr.Saver said:

Yes, if you earn a net salary above 50k, salary sacrifice almost certainly can help you reduce the amount of income tax (and NICs) you need to pay. To work out the exact number, you will need to know your other taxable incomes and tax reliefs too.
But to keep it simple, if you don't have much taxable income from other sources (property rental income, savings interest, dividends from company shares, benefits you get from your job, etc.), and your net salary after salary sacrifice is below 50k, you should be fine.
If you want to learn more about the rules, you can read more at https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
and https://www.gov.uk/guidance/adjusted-net-income

/golfclap
OP specifically says his employer doesn’t offer SS....you go off on one lauding SS benefits. Impressive!

Sheriff_Fatmen

Mr.Saver said:

lisyloo said:

Yes but you’ll have to claim it back.
your pension scheme will automatically claim back basic rate tax.
Assuming your affairs are simple then at the end of the tax year you need to write to your tax office after the end of the tax year (about now after getting P60) and claim back the higher rate tax.
note this will go back into your pocket not into your pension.
you MAY be able to sign up fo self assessment and do it online or you could phone or write to your tax office,
i believe they now have user forums which might help
but basically you’ll need to pay it and then get it back (to your pocket not your pension).
you might want to suggest salary sacrifice to your employer as they can save money too so it’s a win win. I’ve done this before.

That is not accurate. By using a salary sacrifice schema, the pre-tax income is paid into a pension, without deducting the income tax and NICs, therefore the employee who made the pension contribution does not need to contact the HMRC and claim tax relief on it.

The OP is NOT in Salary Sacrifice scheme. 

Mr.Saver

Sheriff_Fatmen said:

Mr.Saver said:

lisyloo said:

Yes but you’ll have to claim it back.
your pension scheme will automatically claim back basic rate tax.
Assuming your affairs are simple then at the end of the tax year you need to write to your tax office after the end of the tax year (about now after getting P60) and claim back the higher rate tax.
note this will go back into your pocket not into your pension.
you MAY be able to sign up fo self assessment and do it online or you could phone or write to your tax office,
i believe they now have user forums which might help
but basically you’ll need to pay it and then get it back (to your pocket not your pension).
you might want to suggest salary sacrifice to your employer as they can save money too so it’s a win win. I’ve done this before.

That is not accurate. By using a salary sacrifice schema, the pre-tax income is paid into a pension, without deducting the income tax and NICs, therefore the employee who made the pension contribution does not need to contact the HMRC and claim tax relief on it.

The OP is NOT in Salary Sacrifice scheme. 

Damn, how did I miss that.......
Sorry....

penners324

Why limit your take home pay in that way? 

KeepOnKnitting

penners324 said:

Why limit your take home pay in that way? 

Because it means you get to keep more of it, rather than the tax-man. You just have to wait to get it later in life.