Going over annual allowance

NedS

Grumpy_chap said:

It must be an edge case for BR tax payer to exceed AA.

You would need generous employer contribution percentage plus SS to NMW. 

Or be a member of a DB final salary with a large pay rise or a CARE scheme buying added pension in a period of rising inflation. I earn less than £30k but will be well over the AA this year. When calculating my Pension Input Amount, my starting amount was subject to a 3.1% CPI uplift whereas my end amount could be subject to 10% CPI uplift.

Simes122

zagfles said:

Simes122 said:

I think there is a way to benefit from Scheme pays.  If some unused Intermediate/Lower Rate headroom exists in retirement.

Lets say I put in £10000 via Sal Sac (over annual allowance)
Generates a tax liability of 41% - ie, a tax bill of £4100.
Scheme pays £4100 from DC pot.

£10000 - £4100 = £5900 left in DC pot from above.

25% TF =£1475
75% taxable = £4425
If tax is paid at 21%: Tax = £929.25
Net Payable = £4970.75
(vs £4575 via PAYE @41%)

So slightly better if I can pull that out within my 21% intermediate band, which I can if I defer taking my Uni DB pension (and that generates around a 3% benefit each year I don't take it early).  I can't get my head around whether that just shifts the issue in time (ie I will have more in my DC pot now that'll be taxed later at 41% when I do take my Uni DB pension).

Yes if you just create a bit of spare BR band by moving income to a time when you'll pay HR tax, you've not achieved anything, as income that would have been taxed at BR will now be taxed at HR!

You probably just need to attempt to calculate the likely PIA before the end of the tax year and try not to exceed the AA. I presume you've worked out how much carry forwards (if any) you have?

Thanks - that was my sense - arghh I hate tax 😂.  Yes, I’ve worked out carry forwards - I have none sadly! 😂

Simes122

NedS said:

Grumpy_chap said:

It must be an edge case for BR tax payer to exceed AA.

You would need generous employer contribution percentage plus SS to NMW. 

Or be a member of a DB final salary with a large pay rise or a CARE scheme buying added pension in a period of rising inflation. I earn less than £30k but will be well over the AA this year. When calculating my Pension Input Amount, my starting amount was subject to a 3.1% CPI uplift whereas my end amount could be subject to 10% CPI uplift.

I will have that problem too this year - good point and one to factor in.  I’m expecting a cost of living raise as well.