Question about D0 tax code on pension

Allotment64

Hi MSE,

I have a full time job that on my P60 says I my taxable income is roughly £1000 into the 40% tax bracket.
Last year I took a small pension from an old job that is worth £6K a year.

The pension income is 100% taxed at 40% meaning a yearly income of £3600 from it.

My question is, would it be worth me paying more into my current company pension, so bringing my taxable income back into the 20% range, meaning the current pension would then be taxed at 20%, (£4800 per annum rather than £3600 per annum).

Or will the pension income still be taxed at 40% due to it pushing my total taxable income back into the 40% bracket?

Many Thanks

molerat

How are your current pension deductions made - net pay / sal sac or relief at source ?  Your total income is £7K into 40% so if the former you need to pay an extra £7K into the pension to take you out of higher tax.  Do you have any savings interest as that also needs to be taken into account.

Albermarle

so bringing my taxable income back into the 20% range, meaning the current pension would then be taxed at 20%, (£4800 per annum rather than £3600 per annum).

More likely it will still be taxed at 40%, but at some point you will get a tax rebate.

[Deleted User]

Albermarle said:

so bringing my taxable income back into the 20% range, meaning the current pension would then be taxed at 20%, (£4800 per annum rather than £3600 per annum).

More likely it will still be taxed at 40%, but at some point you will get a tax rebate.

One could ask HMRC to allocate £4800 of the personal allowance to that source. 

Allotment64

molerat said:

How are your current pension deductions made - net pay / sal sac or relief at source ?  Your total income is £7K into 40% so if the former you need to pay an extra £7K into the pension to take you out of higher tax.  Do you have any savings interest as that also needs to be taken into account.

Salary sacrifice with the company matching 6%, think I pay in about 11% of salary.
No savings interest.

Allotment64

Albermarle said:

More likely it will still be taxed at 40%, but at some point you will get a tax rebate.

Do you know how that would work or be calculated?

Allotment64

[Deleted User] said:

Albermarle said:

so bringing my taxable income back into the 20% range, meaning the current pension would then be taxed at 20%, (£4800 per annum rather than £3600 per annum).

More likely it will still be taxed at 40%, but at some point you will get a tax rebate.

One could ask HMRC to allocate £4800 of the personal allowance to that source. 

Happy to call HMRC as they're always so helpful, (this all started because they applied the D0 tax code to ALL my earnings, that was a fun day), but would they really consider doing that?