2024 pension lump sum

Karen1980_Lily

I am fortunate to have the problem I know.
I have employer wages of 49k. I've got savings earning around 2.5k. Rounding to 3 as it's easier on the maths.
My total income is therefore 52k. This means I am now a 40% tax rate payer. HMRC confirmed.
I want to make a lump sum payment to my pension as I know I can claim tax back on that.
If I pay 12k in my pension 20% relief is just under 2.5k.
Is it 20% or 40% or a mixture I will get since this paynent will being me back to 20%?

TheSpectator

You will only get 40% tax relief on the amount of income that you pay 40% tax on.

How are you paying the lump sum and what type of pension scheme?

Karen1980_Lily

I'm paying it from my bank account and into a DC pension.  I usually pay monthly but want to avoid going into the 40% tax as it impacts my interest allowance. 

penners324

Your DC pension will add 25%.

There's no extra to claim back. You're very close but below the 40% threshold on your salary plus interest anyway. Even if you go over the threshold it's a very small amount you could claim

DRS1

Why does the heading say 2024?  Is it that you want to pay the contribution in this tax year 2024/5?  If so the clock is ticking.

TheSpectator

penners324 said:

Your DC pension will add 25%.

There's no extra to claim back. You're very close but below the 40% threshold on your salary plus interest anyway. Even if you go over the threshold it's a very small amount you could claim

Not so sure on being below the threshold - on taxable pay of £49k + £3k interest there will be a HR liability of £1,230 @ 40%.

Dazed_and_C0nfused

TheSpectator said:

penners324 said:

Your DC pension will add 25%.

There's no extra to claim back. You're very close but below the 40% threshold on your salary plus interest anyway. Even if you go over the threshold it's a very small amount you could claim

Not so sure on being below the threshold - on taxable pay of £49k + £3k interest there will be a HR liability of £1,230 @ 40%.

I think it relates to this comment from the op, it  appears she may have overlooked some key information.

I'm paying it from my bank account and into a DC pension. I usually pay monthly but want to avoid going into the 40% tax as it impacts my interest allowance

If she has already made some relief at source contributions then she may not actually even be a higher rate payer as she will have an increased basic rate band from those existing contributions.

jaybeetoo

If you haven’t already done so put £20k of your savings in an ISA ASAP and do the same again on 6 April.  That will shelter some interest from tax.

Karen1980_Lily

DRS1 said:

Why does the heading say 2024?  Is it that you want to pay the contribution in this tax year 2024/5?  If so the clock is ticking.

Yes, it is for this year and I know it is 😬

Karen1980_Lily

jaybeetoo said:

If you haven’t already done so put £20k of your savings in an ISA ASAP and do the same again on 6 April.  That will shelter some interest from tax.

I've done that too. I'm just trying to work out how much to lump sum into a pension to get my tax return back to a 20% payer so I can have the interest allowance of £1000 instead of £500

Karen1980_Lily

TheSpectator said:

penners324 said:

Your DC pension will add 25%.

There's no extra to claim back. You're very close but below the 40% threshold on your salary plus interest anyway. Even if you go over the threshold it's a very small amount you could claim

Not so sure on being below the threshold - on taxable pay of £49k + £3k interest there will be a HR liability of £1,230 @ 40%.

I'm just trying to work out how much to lump sum into a pension to get my tax return back to a 20% payer so I can have the interest allowance of £1000 instead of £500