Pension contribution and increase to basic rate tax band

Fred581

A quick question regarding a pension contribution of £3,600 gross (maximum allowed as no earned / relevant income).
I am retired and with my pension income and interest on cash savings will likely exceed the basic rate tax allowance. As I have made a pension contribution of £3,600 gross this year will this have the effect of extending my basic rate tax band to £41,300 (i.e. £37,700 + £3,600) ?

I believe this is correct but just wanted to check with forum members. 

Dazed_and_C0nfused

Yes.  

Do you usually complete a tax return each year?

Fred581

Only just starting again as going over the £10k of interest per year.

Dazed_and_C0nfused

Fred581 said:

Only just starting again as going over the £10k of interest per year.

Then all you need to do is include the pension contribution details in the relevant part of the return.

Fred581

A quick follow-up to original question.
Where I have made pension contributions of £3,600 gross and thereby extended my basic rate tax band to £41,300, my total earnings will now be within the newly extended basic rate tax band but will this have any impact on my Personal Savings Allowance i.e. will it stay at £1,000 or will it be reduced to £500 ?

SacredStephan

Your PSA will be £1000.

Dazed_and_C0nfused

Fred581 said:

A quick follow-up to original question.
Where I have made pension contributions of £3,600 gross and thereby extended my basic rate tax band to £41,300, my total earnings will now be within the newly extended basic rate tax band but will this have any impact on my Personal Savings Allowance i.e. will it stay at £1,000 or will it be reduced to £500 ?

Assuming you have completely ignored the savings nil rate band (aka Personal Savings Allowance) in the calculation you've done which is highlighted in bold above then you will benefit from the £1,000.

Unlikely to be anything to be concerned about unless you have any Capital Gains but that £1,000 uses up your basic rate band, even though it has a 0% tax rate.