Interest exemption if pension contributions put pay below 50k?
MattMontreal
Posts: 56
Forumite
Hi all,
Hopefully a simple one: at my new job I earn a bit more than 50k, which would normally put me in the 40% bracket, but I'm contributing the maximum to my workplace's private pension, which puts me a bit below 50k.
Am I right in thinking that for purposes of interest on Savings accounts my taxexempt rate would then be 1000 (basic rate) instead of 500 (40%)?
Thanks!
Matthew
Hopefully a simple one: at my new job I earn a bit more than 50k, which would normally put me in the 40% bracket, but I'm contributing the maximum to my workplace's private pension, which puts me a bit below 50k.
Am I right in thinking that for purposes of interest on Savings accounts my taxexempt rate would then be 1000 (basic rate) instead of 500 (40%)?
Thanks!
Matthew
0
Comments

Assuming your pension contributions are paid before tax, yes. Don't forget income from savings interest pushes your income back up thoughI consider myself to be a male feminist. Is that allowed?1

Yes. Your pension contributions raise the usual £50,270 thresholdBTW if you pension contributions take you from a bit above £50k to a bit below it are you sure you are making the 'maximum' contribution. If your employer limits the amount you may be able to make direct payments to it or open a SIPP1

surreysaver said:Assuming your pension contributions are paid before tax, yes.It's a yes even if paid from taxed salarySalary sacrifice directly reduces your salary so it might be below the higher rate thresholdIf paying from taxed salary HMRC will increase the higher rate threshold from £52,270 which again might put your salary below itThe net affect on your PSA is the same1

MattMontreal said:Hi all,
Hopefully a simple one: at my new job I earn a bit more than 50k, which would normally put me in the 40% bracket, but I'm contributing the maximum to my workplace's private pension, which puts me a bit below 50k.
Am I right in thinking that for purposes of interest on Savings accounts my taxexempt rate would then be 1000 (basic rate) instead of 500 (40%)?
Thanks!
MatthewIt depends how much the "bit" is.If eg your earnings after pension conts are taken off is £49,900, then you'd only have £500 tax free interest allowance. Because if you earn £500 interest your total income including interest will exceed the higher rate threshold, even though you don't pay any higher rate tax.Your total income including interest, even interest within the tax free PSA, must be within the basic rate band to get the £1000 tax free interest allowance.
2 
Is there any calculator or something out there where you can just input numbers to work it out?0

Much clearer  thanks for the info all!
0
Categories
 All Categories
 341.6K Banking & Borrowing
 249.7K Reduce Debt & Boost Income
 449.1K Spending & Discounts
 233.7K Work, Benefits & Business
 605.7K Mortgages, Homes & Bills
 172.4K Life & Family
 246.6K Travel & Transport
 1.5M Hobbies & Leisure
 15.8K Discuss & Feedback
 15.1K Coronavirus Support Boards