Loss of personal allowance

shortseller09

I would be grateful if you kind folk could clarify the following query regarding loss of personal allowance. 

The vast majority of my income (approx 80%) is commission based and I was fortunate to earn just over £125k for 19-20, but got stung with a £5k tax bill due to loss of personal allowance (entirely down to me taking my eye off the ball). This year is likely to be around the £150k mark. I have already made a £16k gross pension contribution this tax year, and will top this up with another £4k in March, which, unless I'm wrong, should allow me to regain the personal allowance.

If I had not made any pension contributions, can I avoid the end of year tax bill by adjusting my tax code so that PAYE takes care of it? If so, why would this not have been done for this tax year (currently 1098L)?

Dazed_and_C0nfused

Firstly I'm not sure why you think you will retain your Personal Allowance if your adjusted net income is going to be £130k (150-16-4).

Secondly the simplest thing to do is go onto your Personal Tax Account and update your estimated taxable pay/salary for your employment (the amount you expect to see reported on your P60 for 2020:21) and this should, in the circumstances you describe, generate a new tax code taking into account any reduction on Personal Allowance that is due.

If you owe tax for 2020:21, over and above anything paid through PAYE and wish this to be collected through your 2022:23 tax code then you must file your 2020:21 Self Assessment return by 30 December 2021 (not 31 December), owe less than £3,000 and still be in employed earning good money.

shortseller09

Yes, not quite sure what I was thinking, thanks for the information.

Clive_Woody

For my understanding if you salary sacrifice (into a pension) down to less than £100k earnings, then presumably you do not lose any of your personal allowance and also would not need to complete a self assessment - assuming PAYE and no other tax complications?

Mutton_Geoff

Clive_Woody said:

For my understanding if you salary sacrifice (into a pension) down to less than £100k earnings, then presumably you do not lose any of your personal allowance and also would not need to complete a self assessment - assuming PAYE and no other tax complications?

Correct.