40% tax

Alitree

Isthisforreal99 said:

Cobbler_tone said:

Must be DC as wouldn’t have triggered MPAA otherwise.

Except that the continuing employment and pension they are contributing to is maybe a different pension to the one in payment.

Yes i am drawing a pension from an old employer but paying into my new employers one - i asked payroll and they said

"As the contributions are taken after tax it would not reduce your taxable gross"

Confused!.

Alitree

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

[Deleted User]

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

It doesn’t reduce your taxable gross but it does increase the amount that you can receive before paying 40% tax. 

Dazed_and_C0nfused

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Alitree

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

Dazed_and_C0nfused

Alitree said:

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

But if you tell HMRC about any relief at source pension contributions they will take them into account when calculating your tax.

Reducing your income is obviously another option.

[Deleted User]

Alitree said:

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

Reducing your income by £1000 is considerably worse that paying an extra 20% tax on £1000.

vacheron

[Deleted User] said:

Alitree said:

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

Reducing your income by £1000 is considerably worse that paying an extra 20% tax on £1000.

Agreed. Why ask for a £1000 pay reduction to save £200? 

Obviously there are other cliff edges like the reduction to the PSA which may have an impact too.

If you were set on this approach, a better option would be to ask to reduce your hours by an amount that reduces your pay by £1000, at least that way you would actually benefit in some way. 

Alitree

vacheron said:

[Deleted User] said:

Alitree said:

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

Reducing your income by £1000 is considerably worse that paying an extra 20% tax on £1000.

Agreed. Why ask for a £1000 pay reduction to save £200? 

Obviously there are other cliff edges like the reduction to the PSA which may have an impact too.

If you were set on this approach, a better option would be to ask to reduce your hours by an amount that reduces your pay by £1000, at least that way you would actually benefit in some way. 

i was thinking it might bring the tax on my pension back down to 20%

Isthisforreal99

Alitree said:

vacheron said:

[Deleted User] said:

Alitree said:

Dazed_and_C0nfused said:

Alitree said:

ColdIron said:

Alitree said:

question is can i put more into another pension with my current work to offset that

Yes. You can pay into a SIPP or your current pension (if it's a defined contribution one) and HMRC will increase your basic rate band (£37,700) by the amount of the gross contribution (includes your contribution and 20% basic relief). So if you contribute £1,000 your £37,700 will become £38,950 (£37,700 + £1,250) effectively raising the £50,270 threshold to £51,520

Thanks for this but my payroll boss is saying

As the contributions are taken after tax it would not reduce your taxable gross.

That sounds like the "relief at source" method is being used.

That means it has no impact whatsoever on your taxable income.

But you get basic rate tax relief added to the pension and your basic rate band is increased by the amount of the gross contribution.  So more of your income can be taxed at 20% and less at 40%.

Thanks - but all my pension i am drawing is getting taxed at 40% currently on a DOX code - might be easier to ask to reduce my pay by 1k annually to drop me back under the threshold

Reducing your income by £1000 is considerably worse that paying an extra 20% tax on £1000.

Agreed. Why ask for a £1000 pay reduction to save £200? 

Obviously there are other cliff edges like the reduction to the PSA which may have an impact too.

If you were set on this approach, a better option would be to ask to reduce your hours by an amount that reduces your pay by £1000, at least that way you would actually benefit in some way. 

i was thinking it might bring the tax on my pension back down to 20%

You will still pay tax on all income over the higher rate threshold - so if you did drop £1000 salary this might 'free up' £1000 of your basic rate band meaning the first £1000 of your pension would be taxable at 20% with the remainder still at 40%.

Giving up £1000 salary makes you worse of, pure and simple.