Pension contributions above £100k

PedroMatias

With fiscal drag and high inflation, me and many of my colleagues are starting to have to get to grips with loss of personal allowance etc.

So far I've been making sure I stay below £100k net (and therefore keep my personal allowance) through a combination of pension contributions (matched company percentage and regular additional payments) and salary sacrifice (EV car and Cycle to Work). That's going to get more difficult over the next few years as wages grow and allowances stay static.

Are there any downsides or hidden traps to ploughing money into the pension up to the £60k limit, aside from it being locked away until retirement? Will I need to be doing a tax return to utilise leftover allowance from previous years? I currently get the relief at source as I pay directly into the company scheme, but I don't know how it will work regarding utilisation of previous years allowance while being PAYE. 

I'm really loathe to be paying a 60% tax rate, but don't want to somehow shoot myself in the foot! 

norsefox

Do you complete a tax return, or has HMRC amended your tax code to ensure you already get the benefit of the HRT relief?

PedroMatias

norsefox said:

Do you complete a tax return, or has HMRC amended your tax code to ensure you already get the benefit of the HRT relief?

My tax code was dropped to almost zero at the start of the tax year, so I redeclared my predicted income below £100k on the app and they amended it back to nearly full allowance. I just need to be careful now to keep my net income below £100k to avoid a tax bill at the end of the year! I haven't had to do a tax return yet, and I believe the threshold has been increased to £150k so I shouldn't need to for the foreseeable future either. 

Jeremy535897

The £150,000 "limit" was abolished in the Autumn statement. The issue is whether you will be given adequate tax relief at the higher rate for your pension scheme contributions. You might need to complete a SA return to claim it.

xylophone

I currently get the relief at source as I pay directly into the company scheme, 

Do you  really mean that the scheme operates RAS?

Or do you mean that it operates "net pay"?

https://www.litrg.org.uk/tax-guides/tax-basics/do-i-have-join-pension-scheme/do-you-know-how-tax-relief-your-pension

PedroMatias

xylophone said:

I currently get the relief at source as I pay directly into the company scheme, 

Do you  really mean that the scheme operates RAS?

Or do you mean that it operates "net pay"?

https://www.litrg.org.uk/tax-guides/tax-basics/do-i-have-join-pension-scheme/do-you-know-how-tax-relief-your-pension

Apologies, you're quite correct, it operates net pay... the gross amount is deducted prior to our PAYE tax calculations.

I assume it'll all take care of itself unless I contribute over £60k? TBH, that's unlikely for now. 

DaveDave85

So far I've been making sure I stay below £100k net (and therefore keep my personal allowance) through a combination of pension contributions (matched company percentage and regular additional payments) and salary sacrifice (EV car and Cycle to Work). That's going to get more difficult over the next few years as wages grow and allowances stay static.

You mentioned making regular additional payments - are these from your after-tax pay? Ie from you bank account after receiving your pay. If that is the case, would you not need to file a tax return (self assessment) in order to "take credit" for these payments with HMRC and ensure your personal allowance is not impacted when HMRC reconciles your total taxable income to what you have told them as an estimate? Otherwise how will they know you have made those additional contributions?

I am in the same boat, managing taxable income to below 100k thus far through regular pension contributions, but expect to receive a bonus which will neccesitate a lump sum additional payment into my pension. My expectation is that I will need to complete a self assessment to declare that payment and claim the tax relief.