Income Above 51k

iViewTV

Evening.

Im due a payrise in September which will take my earnings to around 54.7K annually. With this i currently pay 3% into my employers pension he has set up, where he pays 2%. 

The question is, whats the best method of having tax relief so im not paying 40% on any of my earnings above 50k? 

I've read that i can pay extra pension contributions, how does this work?

Dazed_and_C0nfused

iViewTV said:

Evening.

Im due a payrise in September which will take my earnings to around 54.7K annually. With this i currently pay 3% into my employers pension he has set up, where he pays 2%. 

The question is, whats the best method of having tax relief so im not paying 40% on any of my earnings above 50k? 

I've read that i can pay extra pension contributions, how does this work?

How it works is 100% dependent on the method used to get extra money into your pension.

The three usual methods are,

Net pay (reduces your income for tax purposes)

Relief at source (you get 25% added to your contribution and the gross contribution increases your basic rate tax band)

Salary sacrifice (you agree to take a reduced salary and in return your employer makes extra employer pension contributions)

Pension contributions can definitely help you avoid paying higher rate tax but until you know the method being used, for both your current and any extra contributions, you cannot understand how it will work.

Devongardener

Check what your employer is paying, it should be at least 3% under auto enrolment.

Albermarle

iViewTV said:

Evening.

Im due a payrise in September which will take my earnings to around 54.7K annually. With this i currently pay 3% into my employers pension he has set up, where he pays 2%. 

The question is, whats the best method of having tax relief so im not paying 40% on any of my earnings above 50k? 

I've read that i can pay extra pension contributions, how does this work?

Normally the minimum contributions to an auto enrolment scheme is 3% employer + 5% from you. They were lower in the past.
Apart from the tax relief question, it has to be pointed out that 8% going into a pension is very likely to be inadequate to produce a decent income on retirement.

Arl71

As above, the minimum total pension contribution under auto-enrolment is a total of 8%, so if the employer is only paying 3% then you should be paying 5% as a minimum.  Rates have changed over the years so perhaps your employer has missed that.

hugheskevi

It sounds like you are already a higher rate taxpayer prior to the forthcoming pay increase. Have you been taking any action to avoid higher rate tax in previous years, or is 2024/25 the first year you will be a higher rate taxpayer? Have you calculated your expected taxable income in 2024/25 - taking into account things like bonuses, interest income, benefits in kind, rental income, etc?

Note that statutory minimum contributions are only applicable to qualifying earnings, which is the amount between £6,240 and £50,270. It appears your current income is above the upper threshold, so as long as the employer is contributing £1,321 p/a to the pension that meets requirements.