60% tax trap - explanation please

Avro1995

Hi there 
I am trying to get my head round the 60% tax trap. Hypothetical situation below.

Salary - £105000 + £5000 car allowance (£110k total)

My initial thoughts were that to beat the tax trap I need to make a personal contribution of net £8000 ie from my account to a separate private pension I have (as £2000 tax relief from government) this would bring my adjusted net income to £100k effectively meaning Im not in the trap.

My queries are the following

If I am already contributing to my workplace scheme 5% each months (relief at source) and my employer is already doing the same - do these already reduce my adjusted income for this?

How does the higher rate relief effect this and how is it usually done - via refund on self assessment or by tax code? And is this immediate or is it effective from the next tax year.

If someone could please do a worked ILLUSTRATIVE ONLY example of the above scenario that would be great - Assume £105k basic 5k guaranteed car allowance. 5% employee and 5% employer contributions already being made from payslip. Would it already be below the threshold? How does the higher rate relief play into the calculations if at all and how would it differ if increasing the employer pensions or paying it from net income to another private pension.

I would be very appreciative - please note I am aware an adviser can help me which i will do i just want to get my head round it all

Dazed_and_C0nfused

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Avro1995

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Dazed_and_C0nfused

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

Avro1995

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

Dazed_and_C0nfused

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

Avro1995

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

Dazed_and_C0nfused

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Bookworm105

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

as your hypothetical scenario does not trigger any of the compulsory tax return criteria, Self Assessment tax returns: Who must send a tax return - GOV.UK  then the position re claiming tax relief is :

a) you can choose to complete self assessment 
or
b) you can choose to claim the relief by sending a letter showing the figures (ie not a tax return) 
How to claim higher rate tax relief on pension contributions | Unbiased

Avro1995

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Taken from Tax on your private pension contributions: Tax relief - GOV.UK

If you pay Income Tax above 20% (England, Wales or Northern Ireland)

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

• 20% up to the amount of any income you have paid 40% tax on
• 25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%

TheSpectator

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Taken from Tax on your private pension contributions: Tax relief - GOV.UK

If you pay Income Tax above 20% (England, Wales or Northern Ireland)

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

• 20% up to the amount of any income you have paid 40% tax on
• 25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%

Surely the bottom bit covers your situation? You have no SA criteria so no need to complete one to claim pension relief.