Paying lump sums into works DC Pension / annual allowance

Mick70

1. for this coming financial year I am paying in extra high contributions (and employer 16%)  , have worked out that with the govt tax relief that automatically gets added by end of March 21 the amount going in should be about 38k ,  so will be 2k short of the annual allowance .
Question I have , is it worth paying in a lump sum one off contributions from my savings of 2k in order to get the govt tax relief added ?    or is that a bad idea ?

2.  Annual allowance query - re: the 40k allowance   re: the above query if i dont pay in the lump sum does that mean the following year i can pay in 42k ?  will i still get the govt tax relief/bonus  added to that additional 2k ?  and how will that impact my tax return for that year ?      ps- currently a 40% tax payer 

many thanks
mick


 

Marcon

Mick70 said:

1. for this coming financial year I am paying in extra high contributions (and employer 16%)  , have worked out that with the govt tax relief that automatically gets added by end of March 21 the amount going in should be about 38k ,  so will be 2k short of the annual allowance .
Question I have , is it worth paying in a lump sum one off contributions from my savings of 2k in order to get the govt tax relief added ?    or is that a bad idea ?

2.  Annual allowance query - re: the 40k allowance   re: the above query if i dont pay in the lump sum does that mean the following year i can pay in 42k ?  will i still get the govt tax relief/bonus  added to that additional 2k ?  and how will that impact my tax return for that year ?      ps- currently a 40% tax payer 

many thanks
mick


 

1. If you have enough earned income to do so, and you want to increase your pension savings, then worth considering while higher rate tax relief is still with us.

2. See https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

Dazed_and_C0nfused

 so will be 2k short of the annual allowance .
Question I have , is it worth paying in a lump sum one off contributions from my savings of 2k in order to get the govt tax relief added ?    or is that a bad idea ?

You could contribute £1.6k and with the 25% uplift have an additional £2k in your pension fund.

And this will increase your basic rate tax band by £2k meaning you could pay more tax at 20/21% and less at 40/41%.  The actual benefit will depend on your overall tax position i.e. if you are only paying higher rate tax on say £50 then the amount of additional tax saving, over and above the basic rate relief added to the pension fund, is going to be minimal.

The above all assumes you are making relief at source contributions, not net pay or salary sacrifice.

Mick70

Dazed_and_C0nfused said:

 so will be 2k short of the annual allowance .
Question I have , is it worth paying in a lump sum one off contributions from my savings of 2k in order to get the govt tax relief added ?    or is that a bad idea ?

You could contribute £1.6k and with the 25% uplift have an additional £2k in your pension fund.

And this will increase your basic rate tax band by £2k meaning you could pay more tax at 20/21% and less at 40/41%.  The actual benefit will depend on your overall tax position i.e. if you are only paying higher rate tax on say £50 then the amount of additional tax saving, over and above the basic rate relief added to the pension fund, is going to be minimal.

The above all assumes you are making relief at source contributions, not net pay or salary sacrifice.

yes any additional payment would be at source (i.e lump sum payment made from savings account straight to pension probider) ,   gross earnings about £60k so pay 40% band on about 10k .   
Reason i asked in first place was simply as although get the 25% govt tax relief bonus added,  when come to withdraw it at retirement it will be taxed income  , whereas the savings is now tax free income if ever needed