Tax issues over £100K

rjam22
rjam22 Forumite Posts: 3
First Post
Newbie
Good morning

As a one off with bonuses my income has spiked to approx £125K this year (£117K after normal pension contributions)

My tax code is currently 1126L (which is not correct?)
I believe I need to make a one-off pension contribution of £17K to avoid losing my personal tax free allowance

This is a new situation for me so would be grateful if anyone with experience could give me a few pointers on:
1) What figure do I need to contribute to my pension to hit £17K
2) Should my tax code reflect my income at £117K for now i.e. should I be paying tax based on losing my personal allowance to then reclaim later?

Comments

  • purdyoaten2
    purdyoaten2 Forumite Posts: 3,788
    Seventh Anniversary 1,000 Posts Photogenic Name Dropper
    Forumite
    1) £13600 would be grossed up to £17000. Your code is 1126L - are there additional taxable benefits which would further increase your income?

    2) HMRC don’t know what your income will be. They also don’t know of your proposed pension contribution. On that income you must now register for self-assessment if you haven’t already so done.
    ADIOS - ES HORA DE IR 🙋♂️

    (Ha sido divertido)
  • rjam22
    rjam22 Forumite Posts: 3
    First Post
    Newbie
    1) £13600 would be grossed up to £17000. 
    So I cannot then factor in the higher tax rate & tax free allowance loss? Should I therefore be paying that in tax now and then claiming it back when I do a self assessment?
    are there additional taxable benefits which would further increase your income?
    Yes, my income figure includes private health. income protection, life assurance etc.
    2) HMRC don’t know what your income will be. They also don’t know of your proposed pension contribution. On that income you must now register for self-assessment if you haven’t already so done.
    Should I factoring in my proposed pension contribution into my total income on the Govt. gateway portal? Or should I input this as £117K (it is currently set to £100K on my assumption that I will contribute anything over £100K for the year into pension)


    Thanks so much for the valued suggestions
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Forumite Posts: 11,472
    10,000 Posts Third Anniversary Name Dropper
    Forumite
    RAS contributions never reduce your taxable income so you shouldn't manipulate your expected taxable earnings for them.

    They are a separate element of your tax position (they increase your basic rate band and reduce your adjusted net income).
  • rjam22
    rjam22 Forumite Posts: 3
    First Post
    Newbie
    Thanks, I have amended my expected taxable earnings.

    So I've understood that, to bring my £117K income back under £100K

    - I make a one-off gross contribution of £17K, this will cost me £13.6K with relief at source of 20%
    - I then file a self-assessment tax return at the end of the year to reclaim the additional 20% difference to the higher rate. I will get a £3,400 tax rebate
    - Loss of personal allowance isn't being reflected in my tax code currently, so no further rebate there unless my tax code changes mid financial year

    All good?
Meet your Ambassadors

Categories

  • All Categories
  • 338.7K Banking & Borrowing
  • 248.6K Reduce Debt & Boost Income
  • 447.5K Spending & Discounts
  • 230.7K Work, Benefits & Business
  • 600.7K Mortgages, Homes & Bills
  • 171K Life & Family
  • 243.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards