Paying £40k into pension - do I understand this correctly?

Keezing

Hi Everyone,

I'm trying to reach the £40k annual pension contribution allowance - do I understand this correctly?

My base salary is £119k and I receive a discretionary bonus that will push my income to around £140k, so full loss of personal allowance. I would like to get as much of my personal allowance back as possible.

My employer pays in £396.75 per month so £4,761 which I believe counts against the £40k pension allowance, leaving me with left £35,239 to contribute.

It's a relief at source pension so I also need to factor in the 20% tax relief added to my contributions, which I believe leaves me with £28,191 (28191 / 0.8 = 35,239) to contribute to max out the £40k.

Do I then understand correctly that I can separately claim 20% on the £28k in my self assessment?

When determining the impact on my personal allowance, does it consider the full £35k or the £28k I actually put in?

Thanks for your help!

Linton

Keezing said:

Hi Everyone,

I'm trying to reach the £40k annual pension contribution allowance - do I understand this correctly?

My base salary is £119k and I receive a discretionary bonus that will push my income to around £140k, so full loss of personal allowance. I would like to get as much of my personal allowance back as possible.

My employer pays in £396.75 per month so £4,761 which I believe counts against the £40k pension allowance, leaving me with left £35,239 to contribute.

It's a relief at source pension so I also need to factor in the 20% tax relief added to my contributions, which I believe leaves me with £28,191 (28191 / 0.8 = 35,239) to contribute to max out the £40k.

Do I then understand correctly that I can separately claim 20% on the £28k in my self assessment?

When determining the impact on my personal allowance, does it consider the full £35k or the £28k I actually put in?

Thanks for your help!

If you pay in £28191 the gross conteribution is £35239.  It is the £35239 which forms the basis for all calculations eg the higher rate tax would be for 20% of that figure.

Keezing

Linton said:

Keezing said:

Hi Everyone,

I'm trying to reach the £40k annual pension contribution allowance - do I understand this correctly?

My base salary is £119k and I receive a discretionary bonus that will push my income to around £140k, so full loss of personal allowance. I would like to get as much of my personal allowance back as possible.

My employer pays in £396.75 per month so £4,761 which I believe counts against the £40k pension allowance, leaving me with left £35,239 to contribute.

It's a relief at source pension so I also need to factor in the 20% tax relief added to my contributions, which I believe leaves me with £28,191 (28191 / 0.8 = 35,239) to contribute to max out the £40k.

Do I then understand correctly that I can separately claim 20% on the £28k in my self assessment?

When determining the impact on my personal allowance, does it consider the full £35k or the £28k I actually put in?

Thanks for your help!

If you pay in £28191 the gross conteribution is £35239.  It is the £35239 which forms the basis for all calculations eg the higher rate tax would be for 20% of that figure.

Thank you - would this also effectively mean my income is reduced to £105k meaning I get some of my personal allowance back?

MX5huggy

Have you paid in £40k for the previous 3 years? If you haven’t you could pay in more. 

Dazed_and_C0nfused

Keezing said:

Linton said:

Keezing said:

Hi Everyone,

I'm trying to reach the £40k annual pension contribution allowance - do I understand this correctly?

My base salary is £119k and I receive a discretionary bonus that will push my income to around £140k, so full loss of personal allowance. I would like to get as much of my personal allowance back as possible.

My employer pays in £396.75 per month so £4,761 which I believe counts against the £40k pension allowance, leaving me with left £35,239 to contribute.

It's a relief at source pension so I also need to factor in the 20% tax relief added to my contributions, which I believe leaves me with £28,191 (28191 / 0.8 = 35,239) to contribute to max out the £40k.

Do I then understand correctly that I can separately claim 20% on the £28k in my self assessment?

When determining the impact on my personal allowance, does it consider the full £35k or the £28k I actually put in?

Thanks for your help!

If you pay in £28191 the gross conteribution is £35239.  It is the £35239 which forms the basis for all calculations eg the higher rate tax would be for 20% of that figure.

Thank you - would this also effectively mean my income is reduced to £105k meaning I get some of my personal allowance back?

Yes and no!

Your adjusted net income would be reduced by the gross RAS pension contribution so you would retain most of your Personal Allowance.

But your taxable income wouldn't be reduced by a RAS pension contribution.

However your basic rate band would be increased by the gross RAS contribution, meaning more tax is paid at 20% and less at 40%.  That is how you get the higher rate tax relief.