Avoiding 60% marginal rate by using pension carry forward in alternating years?

tsg20

After using my whole £60k pension annual allowance between defined benefit + voluntary pension contributions, my annual gross income is around £120k. It seems to me that if I alternated between using £40k one year and then £80k the next (using carry forward from the previous year), I would save £1500/year or so in tax. Is this right, or am I missing something stupid? And are there obvious disadvantages?

(The disadvantages I've thought of are possible future changes to the rules - although hopefully these would be communicated before the start of any tax year, so could be avoided - plus any additional tax on investments being outside of tax shelters in the 40k year (possibly this could be mitigated by front loading the AVC in the 80k year?).

Dazed_and_C0nfused

tsg20 said:

After using my whole £60k pension annual allowance between defined benefit + voluntary pension contributions, my annual gross income is around £120k. It seems to me that if I alternated between using £40k one year and then £80k the next (using carry forward from the previous year), I would save £1500/year or so in tax. Is this right, or am I missing something stupid? And are there obvious disadvantages?

(The disadvantages I've thought of are possible future changes to the rules - although hopefully these would be communicated before the start of any tax year, so could be avoided - plus any additional tax on investments being outside of tax shelters in the 40k year (possibly this could be mitigated by front loading the AVC in the 80k year?).

Do you really mean the bit in bold?

DB pensions use a pension input amount for annual allowance purposes, the contributions themselves aren't a factor.

tsg20

What I mean is that my total pension contributions mean that upon reaching the 60k annual allowance limit my annual gross income is £120k - I agree that the annual allowance calculation isn't simply adding up the contributions, sorry for any confusion!

areader

Yep, this is a workable strategy. It has been discussed on this forum previously e.g. https://forums.moneysavingexpert.com/discussion/6306904/pension-contribuition-sequencing-any-tax-advantage

Also, see the section "How to get 60% tax relief if you’re a 45% rate taxpayer" at https://monevator.com/rich-optimal-pension-contributions/

and no doubt elsewhere too.