Higher tax payer nhs pension and AVC! Help

dingaling

Hi:)

I work in the NHS and have been working lots of extra hours which is fine as I actually love my job and like the additional money for holidays etc. however the extra hours have tipped me into the higher rate tax bracket (40%) and aside from a large tax bill I know need to pay I started researching how to minimise my tax. My research has said to pay more into a pension. Pensions are confusing. The AVC I have seen says it it’s deducted from gross pay so then I pay less income tax. Can anyone help me? I find all the information a bit overwhelming and want to do the best for me and my family. I have 15 years before I get my state pension and am very likely to be working till then. 

Dazed_and_C0nfused

Pension contributions will reduce your tax liability, the exact benefit depends on just how much higher rate tax you would otherwise be paying.

If the AVC uses the net pay method (like the normal NHS scheme) then that is very simple, you earn say £55k and pay 10% into your pension (including the AVC).  Your taxable income is only £49,500 so you have avoided paying tax on £5,500 of your income.

All happens automatically though payroll.

dingaling

Thank you! That’s really helpful. That would for example take me below the 40% tax rate 

xylophone

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/money-purchase-additional-voluntary-contributions-mpavc

There are two providers who run the NHS MPAVC scheme on our behalf.

You can take out a MPAVC with either:

• Standard Life
• Prudential

Contributions come from your pay and you can choose how much to pay. You may be able to change or stop the amount you pay and switch between funds and NHS providers.

We have negotiated special NHS terms for these arrangements. We review these regularly and there are no commission charges.