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£75k salary - total amount of pension contribution to bring it under £50k

Hi,

Just need some clarification - I have my OH's marriage allowance, and claim child benefit. How much total do I need to invest into my pension (company and SIPP) total in order to bring myself down to just paying basic rate tax, so I don't lose both?

Is it simply something like £20k total per year (so x 1.25 = £25k after the government adds in basic rate), and which I also get to claim back the higher rate tax relief?

Comments

  • You are in a company pension. What is your taxable salary?
  • taxable salary is £75,000. What difference is there between investing in the company pension vs a SIPP (besides the company giving a certain % matched contribution)?
  • Usually the method of contributing.

    Makes a big difference.

    How do you makes your company payments?

    Net pay
    Relief at source
    Salary sacrifice
  • It's relief at source, which mirrors what's happens in my SIPP. In the past I've had to claim the higher rate relief myself, does this mean they're essentially equivalent?
  • Yes.

    With RAS you pay a net contribution and the pension company adds basic rate tax relief (25% of what you pay).

    The gross contribution then increases your basic rate band so more tax can be paid at 20% and less at 40%.

    And the gross contribution reduces your adjusted net income for HICBC purposes.

    NB.  The gross contribution does not reduce your taxable income

  • Thank you, that makes sense. Since my taxable income is not reduced, and remains at £75k, this appears to mean I'm not eligible for the marriage allowance, but my tax code still ends with M?

    Clearly HMRC knows my taxable income is as stated (it's on my P60 statement), so even with this M tax code, does it get applied but nothing taken off? Now concerned if I've underpaid tax and need to pay it back :blush:
  • Found some info on the MSE site (can't paste links unfortunately).

    If you earn above £50,270, but your pension contributions drop your take-home pay to under £50,270, you may still qualify for marriage tax allowance.

    If you're on the pay-as-you-earn system (PAYE), HM Revenue & Customs should already be aware of how much you contribute to your pension. If you self-assess, make sure you specify how much you're contributing to your pension, so HM Revenue & Customs (HMRC) can see your take-home pay is below the £50,270 threshold.

  • Thank you, that makes sense. Since my taxable income is not reduced, and remains at £75k, this appears to mean I'm not eligible for the marriage allowance, but my tax code still ends with M?

    Clearly HMRC knows my taxable income is as stated (it's on my P60 statement), so even with this M tax code, does it get applied but nothing taken off? Now concerned if I've underpaid tax and need to pay it back :blush:
    Your taxable income isn't relevant for Marriage Allowance.

    Providing you aren't liable to higher rate tax (or would be liable to higher rate tax if it weren't for the dividend nil rate band) then you are eligible for Marriage Allowance.
  • Thank you, that makes sense. Since my taxable income is not reduced, and remains at £75k, this appears to mean I'm not eligible for the marriage allowance, but my tax code still ends with M?

    Clearly HMRC knows my taxable income is as stated (it's on my P60 statement), so even with this M tax code, does it get applied but nothing taken off? Now concerned if I've underpaid tax and need to pay it back :blush:
    It’s not your taxable income that is relevant for child benefit purposes - it’s your adjusted net income. Your total taxable income is not reduced by pension contributions but the amount of tax paid on that income is reduced, so long as part of that income would otherwise be taxed at 40%. Your adjusted net income, however, is reduced by pension contributions.
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