2026/27 Tax

andy9

Hi all,
Looking for some advice on my 2026/27 tax situation.
My earnings ( estimated due to unknown potential overtime / bonus payments ) are looking likely to come in about £2K above the 40% threshold.
On top of this interest from savings for the tax year will be at least £1700

Couple of questions….
1. If my income does come in as expected, am I then going to be liable for 40% tax on the savings interest I've earned? So 40% on £1200 ?
2. Can I reduce my income by increasing my pension contributions? So effectively keeping my income below the 40% tax band ? And so I'd only be liable for 20% tax on £700 of savings interest?

Is this a good plan or not?
Thanks in advance

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6687528/2026-27-tax

You can only "reduce" your income with some methods of pension contributions.

With relief at source your income remains the same but you increase your basic rate band.

Same end overall result but you need to understand the method being used to get money into your pension to know how it will all work.

Albermarle

OP To expand on the above.

If you are making pension contributions to a workplace pension, your employer can organise the contributions in three different ways.

Salary sacrifice -

Net Pay - contributions taken out before tax is paid

Relief at source - contributions taken from your taxed pay..

DRS1

Yes it is a good plan.

With relief at source contributions you will need to claim the higher rate tax rebate. How you do that depends on whether you do self assessment tax returns. If you do the claim is made through that return. If not there is an online form. But make sure your contributions are relief at source you wouldn't want to (or need to) try claiming for either of the other two types of contribution.

andy9

Thanks All.
My pension contributions are Relief at source

Albermarle

Plus by increasing your pension contributions you are gaining from very generous 40% tax relief, and putting more in your pension, which your future self will probably thank you for.