How much to contribute to get me below HR tax threshold?

artyboy

(If this sits better in the saving tax board then mods, feel free to move)

My taxable income for 2023/4 is £53,515 (it's unlikely to increase as I'm not currently in employment). I would ideally like to get just below the HR threshold with extra pension contributions - I've got plenty of annual allowance to work with.

Ordinarily, I'd be targeting getting down to £50,270, which would require a gross pension contribution of £3245 - so I'd pay in £2596 net.

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

OR, is it even worse than that, and the K code takes the HR threshold down even further than £37,700?

I think where I'm getting tied up in knots is that I'm trying to do calculations based on a tax code that I know is no longer appropriate, but which I'm not planning to get sorted out till the new tax year.

Thanks
Arty

Marcon

artyboy said:

(If this sits better in the saving tax board then mods, feel free to move)

My taxable income for 2023/4 is £53,515 (it's unlikely to increase as I'm not currently in employment). I would ideally like to get just below the HR threshold with extra pension contributions - I've got plenty of annual allowance to work with.

Ordinarily, I'd be targeting getting down to £50,270, which would require a gross pension contribution of £3245 - so I'd pay in £2596 net.

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

OR, is it even worse than that, and the K code takes the HR threshold down even further than £37,700?

I think where I'm getting tied up in knots is that I'm trying to do calculations based on a tax code that I know is no longer appropriate, but which I'm not planning to get sorted out till the new tax year.

Thanks
Arty

If you're not currently in employment, where is your income coming from? It matters because you can only make tax-relievable pension contributions based on 'relevant earnings' (which usually means income from employment or self employment). 

Income from pensions in payment, dividends, savings interest, (most) rental income etc won't count as relevant earnings.

artyboy

Marcon said:

artyboy said:

(If this sits better in the saving tax board then mods, feel free to move)

My taxable income for 2023/4 is £53,515 (it's unlikely to increase as I'm not currently in employment). I would ideally like to get just below the HR threshold with extra pension contributions - I've got plenty of annual allowance to work with.

Ordinarily, I'd be targeting getting down to £50,270, which would require a gross pension contribution of £3245 - so I'd pay in £2596 net.

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

OR, is it even worse than that, and the K code takes the HR threshold down even further than £37,700?

I think where I'm getting tied up in knots is that I'm trying to do calculations based on a tax code that I know is no longer appropriate, but which I'm not planning to get sorted out till the new tax year.

Thanks
Arty

If you're not currently in employment, where is your income coming from? It matters because you can only make tax-relievable pension contributions based on 'relevant earnings' (which usually means income from employment or self employment). 

Income from pensions in payment, dividends, savings interest, (most) rental income etc won't count as relevant earnings.

Thanks, I'm already clear on that point - this was earned income and PILON from my last job, so yes, relevant earnings. There was more but it was already salsac'd into my pension so I know I have the full 60k AA available to me this year (although have already used about 40k of that).

Marcon

artyboy said:

Marcon said:

artyboy said:

(If this sits better in the saving tax board then mods, feel free to move)

My taxable income for 2023/4 is £53,515 (it's unlikely to increase as I'm not currently in employment). I would ideally like to get just below the HR threshold with extra pension contributions - I've got plenty of annual allowance to work with.

Ordinarily, I'd be targeting getting down to £50,270, which would require a gross pension contribution of £3245 - so I'd pay in £2596 net.

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

OR, is it even worse than that, and the K code takes the HR threshold down even further than £37,700?

I think where I'm getting tied up in knots is that I'm trying to do calculations based on a tax code that I know is no longer appropriate, but which I'm not planning to get sorted out till the new tax year.

Thanks
Arty

If you're not currently in employment, where is your income coming from? It matters because you can only make tax-relievable pension contributions based on 'relevant earnings' (which usually means income from employment or self employment). 

Income from pensions in payment, dividends, savings interest, (most) rental income etc won't count as relevant earnings.

Thanks, I'm already clear on that point - this was earned income and PILON from my last job, so yes, relevant earnings. There was more but it was already salsac'd into my pension so I know I have the full 60k AA available to me this year (although have already used about 40k of that).

Sorry to labour the point, but which tax years are under consideration here? You say you have the 'full £60K AA available to you this year', so just checking your salsac and any 'true' employer contributions were made in the 2022/23 tax year?

I'm steering clear of the real question you asked for the simple reason I don't know the answer - but I hope my thoughts might be handy anyway until someone else comes along who can answer with authority and certainty!

artyboy

Marcon said:

artyboy said:

Marcon said:

artyboy said:

(If this sits better in the saving tax board then mods, feel free to move)

My taxable income for 2023/4 is £53,515 (it's unlikely to increase as I'm not currently in employment). I would ideally like to get just below the HR threshold with extra pension contributions - I've got plenty of annual allowance to work with.

Ordinarily, I'd be targeting getting down to £50,270, which would require a gross pension contribution of £3245 - so I'd pay in £2596 net.

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

OR, is it even worse than that, and the K code takes the HR threshold down even further than £37,700?

I think where I'm getting tied up in knots is that I'm trying to do calculations based on a tax code that I know is no longer appropriate, but which I'm not planning to get sorted out till the new tax year.

Thanks
Arty

If you're not currently in employment, where is your income coming from? It matters because you can only make tax-relievable pension contributions based on 'relevant earnings' (which usually means income from employment or self employment). 

Income from pensions in payment, dividends, savings interest, (most) rental income etc won't count as relevant earnings.

Thanks, I'm already clear on that point - this was earned income and PILON from my last job, so yes, relevant earnings. There was more but it was already salsac'd into my pension so I know I have the full 60k AA available to me this year (although have already used about 40k of that).

Sorry to labour the point, but which tax years are under consideration here? You say you have the 'full £60K AA available to you this year', so just checking your salsac and any 'true' employer contributions were made in the 2022/23 tax year?

I'm steering clear of the real question you asked for the simple reason I don't know the answer - but I hope my thoughts might be handy anyway until someone else comes along who can answer with authority and certainty!

Never for a moment did I think you were ducking the question 

Anyway, yes, I really am clear on this one, I'm talking about 2023/4 AA alone, nothing at all to do with 2022/23 - I have no carry over left anyway. And my relevant taxable income would have been a lot higher but for the fact that I sacrificed my taxable redundancy pay (along with some of my earned salary for the brief time this tax year I was actually employed).

That's why I am clear I am able to use the full 60k this year, and mentioned that I have already used about 40k of that allowance, via salsac.

Qyburn

artyboy said:

BUT... I'm currently on a K tax code, due to prior year tax owing, as well as a - now incorrect - assumption from HMRC that my taxable earnings would be in excess of £125,140, and so I would not have any personal allowance (that's an issue for self assessment, as I'm going to be due a fair old rebate...).

My question - does the K code mean that my HR threshold on my taxable earnings is actually set at £37,700, and so I'd actually need to make a gross pension contribution of £15,815 (£12,653 net) in order to get me down to basic rate tax for this year?

The tax code doesnt change things. The adjustment is there to collect a sum of money from previous years, and to try and get PAYE to collect the correct amount during 2023/24. It doesn't change the applicable rates and bands, which will be worked out from sctrach in your SA.