Reducing tax liability-pension payments

stuhse

I want to avoid paying any tax at 40% by making additional pension contributions to keep my income below the £50271 threshold before the end of this financial year.  Am i right in thinking i can do this ?  I am on course for 50700 of paye earnings plus 5500 of rental income plus i have some work benefits , company car , private health.  I have savings i can use to put a one off additional payment into my pension.  Thankyou

[Deleted User]

Yes you can - every £8 that you contribute to a SIPP, if it is a SIPP, will reduce your adjusted net income by £100.

Jeremy535897

[Deleted User] said:

Yes you can - every £8 that you contribute to a SIPP, if it is a SIPP, will reduce your adjusted net income by £100.

If only (you mean £10 not £100)! This assumes that the annual allowance/total value limits are not in point.

stuhse

Thats great thankyou, i will try and get my head round the actual numbers involved.

Dazed_and_C0nfused

If you contributing to a relief at source pension then the gross contribution has three benefits,

1.  You get basic rate tax relief added to your pension fund i.e. you want £5,000 in your pension fund means you pay £4,000 and the pension company adds £1,000 in tax relief.

2.  Your basic rate tax band is increased by the gross contribution (it doesn't reduce your taxable income).  This moves income from being taxed at 40% to the 20% band.

3.  Your adjusted net income is reduced by the gross contribution.  This is what is used to calculate the High Income Child Benefit Charge and your Personal Allowance (ANI > £100,000).

[Deleted User]

Jeremy535897 said:

[Deleted User] said:

Yes you can - every £8 that you contribute to a SIPP, if it is a SIPP, will reduce your adjusted net income by £100.

If only (you mean £10 not £100)! This assumes that the annual allowance/total value limits are not in point.

Yep - great typo!

Albermarle

stuhse said:

Thats great thankyou, i will try and get my head round the actual numbers involved.

If you have never made a lump sum contribution to your pension before, and it is normally your workplace pension where there are normally regular contributions , then probably best to call them first to check it will be OK .
It should be OK , but best to check.

stuhse

From my p11 D my cash equivalent for my car is 12238  and for private health is 717.
So am i right
Total income = 
50700 paye
12238 car 
717 health
5500 rental income
=69115 TOTAL

Estimated pension contributions for year through PAYE deductions = £2530
69115-50271-2530 =  16314

So i need to put an additional 16314 in my pension to avoid 40% tax ?

[Deleted User]

stuhse said:

From my p11 D my cash equivalent for my car is 12238  and for private health is 717.
So am i right
Total income = 
50700 paye
12238 car 
717 health
5500 rental income
=69115 TOTAL

Estimated pension contributions for year through PAYE deductions = £2530
69115-50271-2530 =  16314

So i need to put an additional 16314 in my pension to avoid 40% tax ?

No - your adjusted net income before pension contributions is 69115 which is 18844 above 50271. You therefore need to put 15075 into your pension which will be grossed up to 18844. You already pay 2530 and, therefore, an additional 12545 payment  is required.