Higher rate tax relief

Albermarle

leosayer said:

Albermarle said:

allyl22 said:

It would be a contribution from my savings and yes I am in Scotland.

Do you also have regular contributions from your salary to a workplace pension? Or are you maybe self employed?

A good question.

A few years back, I had a savings that I wanted to put into a pension. The most efficient way to do that was to increase the % of my salary paid into my work pension via salary sacrifice and then live off the savings instead.

Yes that route is often better.

Also contributions you make to your work pension now, will already be reducing the amount of 40% tax you pay.

allyl22

Yes I do contribute to my workplace pension via salary sacrifice . I explore how much I can increase the contributions by via that route. Thanks

Ciprico

Are you sure you'll be paying 8k in tax and not tax on 8k (in the higher tax band)...?

Dazed_and_C0nfused

Dazed_and_C0nfused said:

It would be a contribution from my savings and yes I am in Scotland.

Presumably you mean relief at source then.

According to HMRC it looks like I will be paying £8000 of higher rate tax this tax year

Personally I would ignore that and calculate your own figures, you are far more likely to know the correct position than HMRC.

But if we use that £8,000 figure it means you have £20,000 in the higher rate band.

So if you add £16,000 to a relief at source pension like a SIPP then that will have £4,000 in basic rate tax relief added making a gross contribution of £20,000.

And your basic rate band will be increased by £20,000 meaning more income is taxed at 20% and less at 40%.

As pointed out by @Qyburn those figures are wrong as I forgot the Scottish element 😢.

So it would be £19,512 gross not £20,000
(£19,513 x 41% = £8,000.33)