AVC - Taking 25% tax free for over 55.

Albermarle

garmeg said:

Albermarle said:

it depends.  Normally the maximum amount in to a pension, is £40k a year, including the tax relief.  So for a 40% tax payer, £40k contributions would cost £24k, after tax relief is taken in to account

The above is correct, but probably worth noting that for a higher rate taxpayer , paying pension contributions from after tax income , only the basic rate relief goes directly in the pension . The higher rate relief is claimed back separately , either as a rebate or an increased personal allowance.

So if the OP added £24K - the pension provider would add £8K - so £32K in the pension . Then £8K in higher rate relief paid direct to the OP , to do what they liked with it.

Basic tax relief is 20% and higher rate is 40% so ...

First £8k should read £6k.
£32k should read £30k.
Second £8k should read £6k as well.

You probably meant 
£32k into pension
Provider tops up by £8k to £40k via tax relief.
Another £8k claimed from HMRC as higher rate relief but thus is paid direct to the OP not the pension.

This may not be correct if OP earns less than £90k because would need to earn at least this to get £40k relieved at 40%.

Yes you are right , a long hot afternoon !