Maximum additional pension contributions and gift aid tax liability

economum

Hello,

I'm about to receive some money and am hoping to make some extra contributions to my (USS) pension scheme  to take out as a cash free lump sum when I retire (hopefully in 5 years time) to pay off the mortgage.

If I put the maximum amount (after allowing for ongoing pension contributions from salary)  into the DC pension as additional contributions (via investment builder) for the next financial year would I then become liable to repay tax on donations gift aided to charity next year? (I  have several standing orders set up).

I don't currently have anything in the investment builder.

I'm a standard rate tax-payer, in case that's relevant.

Thanks so much for any advice - I've searched a lot but haven't seen this issue addressed.

Marcon

economum said:

Hello,

I'm about to receive some money and am hoping to make some extra contributions to my (USS) pension scheme  to take out as a cash free lump sum when I retire (hopefully in 5 years time) to pay off the mortgage.

If I put the maximum amount (after allowing for ongoing pension contributions from salary)  into the DC pension as additional contributions (via investment builder) for the next financial year would I then become liable to repay tax on donations gift aided to charity next year? (I  have several standing orders set up).

Only if you have no taxable income next year (either income or capital gains tax). Alternatively you could carry back donations in 2023/24 to 2022/23 if you choose to do so, up to the date you actually file a self assessment tax return - see https://www.gov.uk/donating-to-charity/gift-aid and see the section 'Getting tax relief sooner'.

economum

Thanks for answering. I'm entirely salary based and don't file a self assessment tax return - I'm not a higher rate tax payer.

i will pay standard rate tax next year. My query is what happens if I pay an amount equivalent to my annual salary into my pension next year. Will the charities I donate to still get gift aid tax relief when that tax has been paid into my pension? Am I still classed as having paid tax if that tax has been put into my pension?

It seems like I'd be claiming that same tax back twice. Is that OK?

( I know that I'll need to allow for employer contributions when calculating the amount put into the pension, so am taking that into account).

Dazed_and_C0nfused

There is no link between relief at source pension contributions and the tax you personally pay.

So you could get pension tax relief of say £2,000 whilst only paying £100 (or even £0) tax yourself.

You don't set one off against the other.

But if you are making net pay contributions then they will reduce the tax you pay and could impact Gift Aid.

The starting point for you is to understand what method you will be use to add the money into your pension.

Net pay

Relief at source

Gross contribution with no tax relief at point of payment (typically to public sector schemes)