Managing adjusted income and annual allowance

Workerbee999

Hi. I would appreciate some views, it’s a first world problem I know…

Firstly, due to a one-off bonus windfall I am likely to have total taxable income of around £220k this year. That includes a small amount of P11d benefits (healthcare) and is after my normal pension contributions to my DB via salary sacrifice.

Secondly, due to a quirk in the rules when moving between sections of the DB due to a role change, I have a one-off opportunity to boost my pension by retaining the number of years service but applying the higher salary. That and the normal extra year service means I am likely to have a pension input amount of circa £100k. Might be a bit less than that with the opening balance inflation adjustment and there may be a small amount of carry forward left but assume it’s £100k for now.

I’m looking to see what options there are - if any - to manage the tax position effectively. I’m not interested in VCTs etc. 

1) Doing nothing I think I will be caught by the taper: 220k +100k = 320k v Taper kicks in after £200k + £60k = £260k. So £60k above, would reduce my Annual Allowance to £30k, right? That’s a lot of tax exposure in one year as I would have to pay 45% tax on £70k pension input?

2)  Could I make an AVC salary sacrifice contribution of £20k ish to bring taxable income below £200k? And if so would it then not matter how much the pension input amount is as the test wouldn’t be applied to reduce via the taper.

3) It would increase pension input to 100k + 20k = 120k though , but it would mean 45% tax on 60k instead of £70k, plus £20k in AVC that can be taken tax free as it’s linked to the DB while only costing me £11k

4) plus, I have a separate HL SIPP that has allowed scheme pays before, so I think I could pay the tax due out of that ( where I might be at risk of having sone falling into 40% tax in the future, so it’s effectively switched into tax free AVC from taxable SIPP.

Would welcome feedback, I may be getting the wrong end of the stick or not tying my maths up properly.

thanks