Calculating how much I can pay into extra pension to avoid paying Income tax?

ISky11

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

TheSpectator

The most you could pay, and get tax relief on, is your earned income of £9,000 but that would be the gross amount including basic rate relief which equates to a net payment by you of £7,200.

However if the objective is solely to avoid paying higher rate tax then slightly less than that would be needed. You talk of not paying any tax? Not sure what you mean by that?

Dazed_and_C0nfused

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

ISky11

Thank you. My poor wording.
So I earn £9,000, pay in "gross" - sorry - into a pension plan and the pension Co. pay in the 20% bit and I claim back the balance for the 40% part through my Tax return?
Oh gosh, I have mangled that somewhat. 

ISky11

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

TheSpectator

ISky11 said:

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

Very wrong, you will still pay 20% tax on it rather than 40%.

ISky11

TheSpectator said:

ISky11 said:

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

Very wrong, you will still pay 20% tax on it rather than 40%.

TY for telling me. I'm a bit sketchy on the reply, my bad. So sorry for being obtuse - a little knowledge in my hands doesn't help in situations like this.
When you say "it" in your last response and paying some tax - I'm unsure. I think I've worded very poorly this time! I will have to pay some tax at 20% on my Pension income. I was trying to get to a position where I get the benefit of not paying any tax on my earned income or should I word that as getting a 20 0r 40% 'boost" on the pensions contributions - (i.e. my PAYE and the rest Self employed - the £9,000 I mentioned in the original post. Is that not possible? I thought I might just achieve this by putting all of my earnings into a new pension pot?

TheSpectator

ISky11 said:

TheSpectator said:

ISky11 said:

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

Very wrong, you will still pay 20% tax on it rather than 40%.

TY for telling me. I'm a bit sketchy on the reply, my bad. So sorry for being obtuse - a little knowledge in my hands doesn't help in situations like this.
When you say "it" in your last response and paying some tax - I'm unsure. I think I've worded very poorly this time! I will have to pay some tax at 20% on my Pension income. I was trying to get to a position where I get the benefit of not paying any tax on my earned income or should I word that as getting a 20 0r 40% 'boost" on the pensions contributions - (i.e. my PAYE and the rest Self employed - the £9,000 I mentioned in the original post. Is that not possible? I thought I might just achieve this by putting all of my earnings into a new pension pot?

Let's say you have exactly £10,000 of untaxed income above the higher rate threshold - you will pay 40% tax = £4000.

You can then pay a net pension contribution of £8,000 and basic rate relief of £2,000 will be added to make it £10.,000. Your basic rate band will be increased by £10,000 meaning that £10,000 income is taxed at 20% instead of 40% so £2,000 instead of 40%. So that £10,000 gross contribution only cost you £6000.

[Deleted User]

If your income is £58000 and the objective is to avoid higher rate tax:

You are £7730 into higher rate tax - £7730 of your income is taxed at 40%. 

If you put £6184 into a SIPP this will be grossed up to £7730 by the claiming back of 20% tax by the pension company. That’s your relief at 20%. 

You can claim the additional 20% by informing HMRC and you will be due a refund of £1546 (20% of £7730)

Obviously this presumes no other income. Perhaps also give yourself some leeway?

[Deleted User]

TheSpectator said:

ISky11 said:

TheSpectator said:

ISky11 said:

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

Very wrong, you will still pay 20% tax on it rather than 40%.

TY for telling me. I'm a bit sketchy on the reply, my bad. So sorry for being obtuse - a little knowledge in my hands doesn't help in situations like this.
When you say "it" in your last response and paying some tax - I'm unsure. I think I've worded very poorly this time! I will have to pay some tax at 20% on my Pension income. I was trying to get to a position where I get the benefit of not paying any tax on my earned income or should I word that as getting a 20 0r 40% 'boost" on the pensions contributions - (i.e. my PAYE and the rest Self employed - the £9,000 I mentioned in the original post. Is that not possible? I thought I might just achieve this by putting all of my earnings into a new pension pot?

Let's say you have exactly £10,000 of untaxed income above the higher rate threshold - you will pay 40% tax = £4000.

You can then pay a net pension contribution of £8,000 and basic rate relief of £2,000 will be added to make it £10.,000. Your basic rate band will be increased by £10,000 meaning that £10,000 income is taxed at 20% instead of 40% so £2,000 instead of 40%. So that £10,000 gross contribution only cost you £6000.

I get where you are coming from (see my post), and you are just creating an example. I believe (open to correction) that the op can only make a contribution up to £9000 gross, being his only ‘earned’ income. 

TheSpectator

[Deleted User] said:

TheSpectator said:

ISky11 said:

TheSpectator said:

ISky11 said:

Dazed_and_C0nfused said:

ISky11 said:

Having just got my State Pension I find myself looking like I'll be paying Higher rate tax this year. I'd like to avoid paying higher tax and tbh, as I have state pension now, perhaps I can pay more into a Pension plan to avoid paying any tax.
I have a Works pension, small amount of PAYE and work Self employment. 24/25 tax year looks like I'll have an income of (say) £58,000. If my self employment earnings say £6000 and Paye £3000 what would be the most I could put into a new pension pot this tax year - can anyone help with the setting out the calculation for me pls? 
TIA

How do you think that might be possible?

I think I can open a new pension pot ( at my age and retired!), paying in earned income. If paying into that pension pot it in theory means there will be no income available then to tax me when I do my tax return? Am I wrong?

Very wrong, you will still pay 20% tax on it rather than 40%.

TY for telling me. I'm a bit sketchy on the reply, my bad. So sorry for being obtuse - a little knowledge in my hands doesn't help in situations like this.
When you say "it" in your last response and paying some tax - I'm unsure. I think I've worded very poorly this time! I will have to pay some tax at 20% on my Pension income. I was trying to get to a position where I get the benefit of not paying any tax on my earned income or should I word that as getting a 20 0r 40% 'boost" on the pensions contributions - (i.e. my PAYE and the rest Self employed - the £9,000 I mentioned in the original post. Is that not possible? I thought I might just achieve this by putting all of my earnings into a new pension pot?

Let's say you have exactly £10,000 of untaxed income above the higher rate threshold - you will pay 40% tax = £4000.

You can then pay a net pension contribution of £8,000 and basic rate relief of £2,000 will be added to make it £10.,000. Your basic rate band will be increased by £10,000 meaning that £10,000 income is taxed at 20% instead of 40% so £2,000 instead of 40%. So that £10,000 gross contribution only cost you £6000.

I get where you are coming from (see my post), and you are just creating an example. I believe (open to correction) that the op can only make a contribution up to £9000 gross, being his only ‘earned’ income. 

Hence why I said 'lets say' - far easier to explain with round sum figures and the £9,000 earned income seems an estimate, so why not make it an easier to understand estimate.

We are also assuming not subject to Scottish rates of tax.