Taxation over £100,000

AlleyCat4

If you receive a previous employment defined benefit pension at age 65 which takes you over the £100,000 income taxation limit can you bring yourself back below this limit by using your AVCs in your current employment defined contribution scheme until retirement at 67.  

Secret2ndAccount

Here's what ChatGPT says

1. The £100,000 limit

• Once your adjusted net income exceeds £100,000, your personal allowance (£12,570 for 2025/26) is reduced.

• For every £2 of income above £100k, you lose £1 of personal allowance.

• At £125,140 or above, the allowance is completely gone (effective 60% tax rate in that band).

---

2. Defined Benefit pension starting at 65

• When you start receiving your DB pension, it is treated as taxable income in full (like a salary).

• This could push your total taxable income for the year above £100,000.

---

3. Can AVCs / pension contributions bring you back below?

Yes — pension contributions to a registered pension scheme (such as your current DC scheme with AVCs) reduce your adjusted net income for this purpose.

• Example:

  • DB pension + salary = £110,000.

  • You contribute £12,000 (gross) into your AVC/DC pension.

  • Adjusted net income = £98,000 → you retain your full personal allowance.

This works because:

• Contributions are deducted from income when calculating adjusted net income.

• The reduction applies whether you’re in a workplace scheme (relief at source or net pay) or making personal contributions (grossed up with basic-rate tax relief, higher-rate relief claimed via self-assessment).

---

4. Limits to be aware of

• Annual Allowance: £60,000 (gross) per tax year, plus any unused allowance carried forward (3 years). Exceeding this triggers a tax charge.

• Relevant earnings: You need enough earned income (salary/self-employed profits) to support the gross pension contributions. DB pension income doesn’t count as “earnings” for contribution purposes, but your salary from current employment does.

• Tapered Annual Allowance: If your adjusted income >£260,000, the annual allowance starts reducing, but from what you describe, you’re below this.

• Cashflow: Money put into AVCs/DC pension is locked in until minimum pension age (currently 55, rising to 57 in 2028). You won’t be able to access it until then

ChatGPT is getting really good at this

kimwp

You can only salary sacrifice down to minimum wage.

dont_use_vistaprint

kimwp said:

You can only salary sacrifice down to minimum wage.

I could be wrong on this but when you complete your tax return isn’t there the facility to use last years allowance or even up to 3 years, with regard to the amount of extra money you want to put into a pension? 

I am pretty certain in the past used previous years and sacrificed an entire years salary plus more 

Dazed_and_C0nfused

dont_use_vistaprint said:

kimwp said:

You can only salary sacrifice down to minimum wage.

I could be wrong on this but when you complete your tax return isn’t there the facility to use last years allowance or even up to 3 years, with regard to the amount of extra money you want to put into a pension? 

I am pretty certain in the past used previous years and sacrificed an entire years salary plus more 

Your employer would have been breaking NMW regulations had you actually done that.

No idea how you can sacrifice more than your
entire salary either 😳

I suspect you are mixing up salary sacrifice (employer contributions) and personal contributions (which can never be salary sacrifice).

Aretnap

Dazed_and_C0nfused said:

dont_use_vistaprint said:

kimwp said:

You can only salary sacrifice down to minimum wage.

I could be wrong on this but when you complete your tax return isn’t there the facility to use last years allowance or even up to 3 years, with regard to the amount of extra money you want to put into a pension? 

I am pretty certain in the past used previous years and sacrificed an entire years salary plus more 

No idea how you can sacrifice more than your entire salary either 😳

Back in my day we had to pay t'mill owner for the privilege of going to work...

But the that to kids these days and they won't believe you!

Secret2ndAccount

We do not know if OP can use salary sacrifice, and we don't know the proportion of salary vs pension. However, if I were to guess, it is more likely the OP needs to understand Annual Allowance and carry forward, rather than National Minimum Wage.
Based on the information given, it seems likely OP can achieve what they want without falling foul of either

DRS1

Aretnap said:

Dazed_and_C0nfused said:

dont_use_vistaprint said:

kimwp said:

You can only salary sacrifice down to minimum wage.

I could be wrong on this but when you complete your tax return isn’t there the facility to use last years allowance or even up to 3 years, with regard to the amount of extra money you want to put into a pension? 

I am pretty certain in the past used previous years and sacrificed an entire years salary plus more 

No idea how you can sacrifice more than your entire salary either 😳

Back in my day we had to pay t'mill owner for the privilege of going to work...

But the that to kids these days and they won't believe you!

"Saint Peter don't you call me cos I can't go
I owe my soul to the company store."

Albermarle

Secret2ndAccount said:

Here's what ChatGPT says

1. The £100,000 limit

• Once your adjusted net income exceeds £100,000, your personal allowance (£12,570 for 2025/26) is reduced.

• For every £2 of income above £100k, you lose £1 of personal allowance.

• At £125,140 or above, the allowance is completely gone (effective 60% tax rate in that band).

---

2. Defined Benefit pension starting at 65

• When you start receiving your DB pension, it is treated as taxable income in full (like a salary).

• This could push your total taxable income for the year above £100,000.

---

3. Can AVCs / pension contributions bring you back below?

Yes — pension contributions to a registered pension scheme (such as your current DC scheme with AVCs) reduce your adjusted net income for this purpose.

• Example:

  • DB pension + salary = £110,000.

  • You contribute £12,000 (gross) into your AVC/DC pension.

  • Adjusted net income = £98,000 → you retain your full personal allowance.

This works because:

• Contributions are deducted from income when calculating adjusted net income.

• The reduction applies whether you’re in a workplace scheme (relief at source or net pay) or making personal contributions (grossed up with basic-rate tax relief, higher-rate relief claimed via self-assessment).

---

4. Limits to be aware of

• Annual Allowance: £60,000 (gross) per tax year, plus any unused allowance carried forward (3 years). Exceeding this triggers a tax charge.

• Relevant earnings: You need enough earned income (salary/self-employed profits) to support the gross pension contributions. DB pension income doesn’t count as “earnings” for contribution purposes, but your salary from current employment does.

• Tapered Annual Allowance: If your adjusted income >£260,000, the annual allowance starts reducing, but from what you describe, you’re below this.

• Cashflow: Money put into AVCs/DC pension is locked in until minimum pension age (currently 55, rising to 57 in 2028). You won’t be able to access it until then

ChatGPT is getting really good at this

I guess soon we will not be needed on this forum, as AI can answer all the questions. 

Secret2ndAccount

That would be mildly sad, but what if it's your job to answer questions? AI is already ending careers, some of which have not yet begun.
Salesforce is a US company which, among other things, offers an AI powered customer support product. They just reduced their own customer support staff from 9,000 to 5,000 thanks to employing their own AI.

Dazed_and_C0nfused

Albermarle said:

Secret2ndAccount said:

Here's what ChatGPT says

1. The £100,000 limit

• Once your adjusted net income exceeds £100,000, your personal allowance (£12,570 for 2025/26) is reduced.

• For every £2 of income above £100k, you lose £1 of personal allowance.

• At £125,140 or above, the allowance is completely gone (effective 60% tax rate in that band).

---

2. Defined Benefit pension starting at 65

• When you start receiving your DB pension, it is treated as taxable income in full (like a salary).

• This could push your total taxable income for the year above £100,000.

---

3. Can AVCs / pension contributions bring you back below?

Yes — pension contributions to a registered pension scheme (such as your current DC scheme with AVCs) reduce your adjusted net income for this purpose.

• Example:

  • DB pension + salary = £110,000.

  • You contribute £12,000 (gross) into your AVC/DC pension.

  • Adjusted net income = £98,000 → you retain your full personal allowance.

This works because:

• Contributions are deducted from income when calculating adjusted net income.

• The reduction applies whether you’re in a workplace scheme (relief at source or net pay) or making personal contributions (grossed up with basic-rate tax relief, higher-rate relief claimed via self-assessment).

---

4. Limits to be aware of

• Annual Allowance: £60,000 (gross) per tax year, plus any unused allowance carried forward (3 years). Exceeding this triggers a tax charge.

• Relevant earnings: You need enough earned income (salary/self-employed profits) to support the gross pension contributions. DB pension income doesn’t count as “earnings” for contribution purposes, but your salary from current employment does.

• Tapered Annual Allowance: If your adjusted income >£260,000, the annual allowance starts reducing, but from what you describe, you’re below this.

• Cashflow: Money put into AVCs/DC pension is locked in until minimum pension age (currently 55, rising to 57 in 2028). You won’t be able to access it until then

ChatGPT is getting really good at this

I guess soon we will not be needed on this forum, as AI can answer all the questions. 

Got to confess, it was better than I expected 😢