Reducing SA Bill by paying into Pension - Forecasting

rtidrtid

Hi All. I have a very slightly fluctuating wage, so only by the end of the tax year I know if I am over £125k. 

In order to cut that down to 100k for Tax purposes, I plan to pay a lump sum into my pension. Does it matter if I actually physically pay it in the next tax year?

For example for my 2024/5 tax return, I'll know my exact P60 by April 2025. Can I pay, say £25k into my pension on 10th April, but count that towards the 2024/25 return? Or do I need to pay it before 4th April? I just want to make sure I pay enough thats all.

Sorry if that is a daft question 

eskbanker

You can't make such payments apply retrospectively, so would need to do so by 5 April for it to count as being 2024/25.

rtidrtid

Ok thanks for the quick reply - I guess i'll need to forward forecast as much as possible.

Dazed_and_C0nfused

rtidrtid said:

Hi All. I have a very slightly fluctuating wage, so only by the end of the tax year I know if I am over £125k. 

In order to cut that down to 100k for Tax purposes, I plan to pay a lump sum into my pension. Does it matter if I actually physically pay it in the next tax year?

For example for my 2024/5 tax return, I'll know my exact P60 by April 2025. Can I pay, say £25k into my pension on 10th April, but count that towards the 2024/25 return? Or do I need to pay it before 4th April? I just want to make sure I pay enough thats all.

Sorry if that is a daft question 

Yes it does matter.  You can only ever get tax relief for the tax year you make the contribution in.  So if you don't contribute by 5 April, or whatever date is the cut off for your scheme, you will have missed the boat.

If the annual allowance isn't a factor then just over estimate a bit, from what you've posted you will still be getting the benefit of higher rate relief on anything above the amount needed for tapered Personal Allowance purposes.

And your payslip will likely be available in plenty of time to give you enough info anyway even if you don't have your P60 till later.

DRS1

If you are going to need to contribute at least £25k why leave it to the last minute?  Why not build in a margin (eg contribute £30k) and spread it over the year?

Grumpy_chap

eskbanker said:

You can't make such payments apply retrospectively, so would need to do so by 5 April for it to count as being 2024/25.

And for the sake of certainty, the OP really needs to make the contribution by mid-March so that whatever delays there might be in assigning the contribution to the OP's pension account, it is absolutely, definitely, certainly a 2023-24 tax year contribution.

The OP also will wish to explore the most tax efficient method of making the extra pension contributions.  Typically, that will be SS if available.

If the OP may or may not be above £125k, it would seem prudent to plan for being somewhere in that range above £100k and make the large part of that extra pension contribution sooner rather than later.  Again, SS may have restrictions on the maximum that can be contributed in one salary period.

The OP also needs to have in mind the AA, which will include the planned £25k or thereabouts contribution plus any contributions made through the year by either the OP or the OP's employer.

DRS1

Er I think that should be 

"And for the sake of certainty, the OP really needs to make the contribution by mid-March so that whatever delays there might be in assigning the contribution to the OP's pension account, it is absolutely, definitely, certainly a 2023-24 2024-25 tax year contribution."