Taxation over £100,000

MeteredOut

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.

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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).

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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. 

Here's what ChatGPT said

Short answer: no — not completely. 😊

Longer answer (quick, friendly rundown):

Why people will still matter

• Context & lived experience. Humans bring local, personal, up-to-date experiences, anecdotes, and judgement that an AI can’t reliably invent or feel.

• Taste, nuance & values. Decisions often depend on preferences, trade-offs, or moral judgement — things best argued by people.

• Trust & accountability. Forum members build reputations, followups, and long-term relationships; that matters for reliability.

• Moderation & culture. People set the tone, enforce rules, and keep communities welcoming. AI can help, but it won’t replace community norms.

• Curiosity & creativity. Human discussion sparks novel ideas, debates, humour, and serendipity in ways AI rarely does well.

• Niche expertise. Very specific or evolving domains (local law, recent product bugs, rare hobbies) often need experts who track real world changes.

Where AI helps (but doesn’t replace)

• Fast answers, summarising research, drafting replies, suggesting resources, or answering routine FAQ-type questions. Best used as a tool to augment human answers, not to fully substitute them.

If you want to reply on the forum, here’s a short suggested post you can copy/paste:

I don’t think so — AI can answer a lot of factual or routine questions quickly, but this forum is about more than raw answers. People bring experience, judgement, follow-ups, humour, and accountability. Use AI as a helper, not a replacement. We’re still the ones who make the place useful and fun.

I'm a huge advocate for AI, to augment ones own knowledge and understanding. For example, it has helped me better understand how to navigate the complex world of tax deferred cumulative allowances with onshore personal investment bonds, and the chargeable gain implications of cashing in full segments versus equal amounts across all segments. 

Given the documentation, and its own understanding from the web, it does a remarkable job of answering queries and making suggestions. ie, fed the relevant information, I can tell it my withdrawal needs over a number of years, and it comes up with a plan for cashing in that makes best use of the the tax benefits of such a bond.

But, you have to know how to use it. Don't just ask it questions, but also question its answers.

QrizB

I've heard it put this way.

AI doesn't know the answer to anything. But it knows what an answer should look like.

Nebulous2

I'm in the early stages of using AI. I'm experimenting with both Gemini and Copilot, sometimes with the same query. 

@Albermarle recently pointed out some pitfalls I might face in moving to a packaged bank account for travel insurance and breakdown recovery. I got Copilot to do a comparison of several different packaged bank accounts and my current policies for my own usage with a summary of the different benefits, disadvantages, extra charges etc. I then entered a possible holiday pattern for the next three years and it modelled my costs over that period.

It was remarkably useful in considering my next steps by showing what I would save and what I would give up in the process of moving to a packaged account. Savings of around £700 over three years, but with some risks moving to me from the insurance companies. 

In some ways it feels for me like the enthusiasm I had for the early search engines. A focus on what you want and trying to provide it for you.

We know how that ended though, you now have to wade through pages of rubbish to sift out the nuggets you want.

I'm sure they'll also invent novel ways to enshittify AI and try to sell us stuff we don't want or need.  There is no way they are investing hundreds of billions in AI without squeezing it until the pips squeak. 

kimwp

I like the Google AI as a prompt for what to then go research. But I wouldn't assume its answers are correct.

SimonSeys

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 wonder if the MSE forums are some of the websites it scrapes for info?

ali_bear

I heard recently there is already a documented case where an AI had scraped AI generated content. 

snowlaser

Chat GPT has missed a further important consideration that MIGHT be relevant here, depending upon what other pensions are being drawn.  A Meta AI answer about it is below.  AI has a very good at writing style but be careful about relying on it too much for accuracy

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The Money Purchase Annual Allowance (MPAA) is a £10,000 annual limit on pension contributions that are eligible for tax relief. You are subject to the MPAA if you've flexibly accessed your defined contribution pension savings, such as by taking a flexible lump sum or starting an income from a flexi-access drawdown plan. The MPAA prevents individuals from repeatedly withdrawing and re-contributing pension money to gain extra tax relief. 

How the MPAA works:

• Normal Contribution Limit: 

  For most people, the standard annual allowance for pension contributions is £60,000. 

Triggering the MPAA: 

When you take certain types of flexible benefits from your pension, you "trigger" the MPAA, and your annual allowance for contributions is reduced. 

MPAA Limit: 

From that point onwards, the maximum you can contribute to your pension (and receive tax relief on) in a tax year is £10,000. This applies to all your money purchase pensions, not just the one from which you took the money. 

Tax Charge: 

If you contribute more than the £10,000 MPAA limit after triggering it, you will face an annual allowance charge on the excess contributions. 

Defined Contribution vs. Defined Benefit: 

The MPAA only affects defined contribution (money purchase) pensions; it does not apply to defined benefit (final salary) schemes. 

What does not trigger the MPAA: 

• Taking your tax-free cash allowance only.
• Buying a lifetime annuity.
• Taking all your money out of your pension pot under the small pots rules.