How to calculate pension contribution % requirement to stay under £50k?

cfrsh91

Hi all

Recently got a pay rise which has put me in the lower reaches of the higher taxpayer bracket (lucky me, until I discovered the minefield ), and I'm trying to calculate how much my pension contribution % should be for the remainder of the year in order for my taxable income to stay under £50k - to avoid paying 40% tax as well as repaying child benefit - which in essence works out to 61% tax!

I have figures of my expected income for the remainder of the FY in a spreadsheet, along with my pension contributions YTD - but I'm getting stumped when trying to create a calculation which results in the % my pension contributions should be for the remainder of the year.

Can anyone help please?

Simon11

Easier if you insert your figures here and we can support.

Rather hard to support you with a spreadsheet that we cannot see!

cfrsh91

Simon11 said:

Easier if you insert your figures here and we can support.

Rather hard to support you with a spreadsheet that we cannot see!

For sure, just wanted to be sure someone was willing to help before I attacked them with numbers 

	Basic	OT/variable	Gross deductions	Gross pay	Tax	NI	Wfld/P11D	Net ded.	Net pay
28/04/2023	£3,005.53	£879.12	-£131.48	£3,753.17	£556.00	£333.86	£7.60	£897.46	£2,855.71
26/05/2023	£3,005.53	£2,024.88	-£131.48	£4,898.93	£966.80	£368.56	£7.60	£1,342.96	£3,555.97
23/06/2023	£3,740.08	£774.14	-£131.48	£4,382.74	£784.40	£358.23	£7.60	£1,150.23	£3,232.51
21/07/2023	£3,893.84	£365.05	-£150.00	£4,108.89	£543.61	£352.82	£7.60	£904.03	£3,204.86
18/08/2023	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
15/09/2023	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
13/10/2023	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
10/11/2023	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
08/12/2023	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
05/01/2024	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
02/02/2024	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
01/03/2024	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
29/03/2024	£3,893.84		-£150.00	£3,743.84	£543.61	£333.10	£7.60	£884.31	£2,859.53
YTD/Est. total	£48,689.54	£4,043.19	-£1,894.44	£50,838.29	£7,743.31	£4,411.37	£98.80	£12,253.49	£38,584.80

Dazed_and_C0nfused

HICBC isn't based on taxable income, it's adjusted net income which counts.

And most pension contributions don't reduce your taxable income (but do reduce adjusted net income).

Which method is used to make your contributions?

Net pay
Relief at source (RAS)?

xylophone

https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/


https://www.gov.uk/child-benefit-tax-calculator

might help.

cfrsh91

Dazed_and_C0nfused said:

HICBC isn't based on taxable income, it's adjusted net income which counts.

And most pension contributions don't reduce your taxable income (but do reduce adjusted net income).

Which method is used to make your contributions?

Net pay
Relief at source (RAS)?

Thanks for the valuable info.
My contributions are made by net pay

xylophone

Thanks for the valuable info.
My contributions are made by net pay

https://community.hmrc.gov.uk/customerforums/sa/c644df82-eb64-ed11-97b2-00155d3ba57b

Dazed_and_C0nfused

cfrsh91 said:

Dazed_and_C0nfused said:

HICBC isn't based on taxable income, it's adjusted net income which counts.

And most pension contributions don't reduce your taxable income (but do reduce adjusted net income).

Which method is used to make your contributions?

Net pay
Relief at source (RAS)?

Thanks for the valuable info.
My contributions are made by net pay

That makes life much simpler then.

You need to look at your taxable pay (the amount which would be shown on your P60) and cannot deduct net pay contributions for HICBC purposes as they have already been deducted in arriving at your taxable pay value.

For example salary £57,000 and net pay contribution of 10% = taxable pay of just £51,300.

You need to add in any other taxable income like interest and dividends.  This is part of your adjusted net income even if taxed at 0%.

You can also deduct the gross amount of any Gift Aid contributions when calculating your adjusted net income.

NB.  I think being able to simply adjust the % of net pay contributions is relatively uncommon but it is they simplest method for making contributions yourself as you get any tax saving immediately each payday.