Max 40% Tax Relief AVC Contribution?

philng

My taxable earnings for this tax yr amount to

Salary £45568.80

Divs £180 net approx

Int £100 net approx

Existing Co Pension non contrib final salary.

Advised max contrib to AVC is 15% of salary.

How much can I pay in to my AVC NET to benefit from 40% tax relief?

My tax coide for this tax yr is 488L.

Thank you.

CLAPTON

basically

salary is 45568
personal allowance 4880
10% band 2230
22% band 32370

so you will pay 40% on 6,088 this tax year

philng

So if I pay 6088 net into my pension I will get a further 40% tax relief added? or can I only pay £6088 Gross?

CLAPTON

I'm assuming that the AVC is paid direct from your salary .. i.e. is a work based scheme and linked to your main pension.
I assume therefore you pay the gross amount and they automatically give you tax relief.. but I guess it depends upon your scheme details

XRAT

Philng,

I paid £5000 to an AVC in March '06, submitted a tax return in April (declaring the addition) and recieved a refund direct to my bank account for 22% in August '06, the outstanding 18% followed in September '06.

meester

CLAPTON wrote: »

basically

salary is 45568
personal allowance 4880
10% band 2230
22% band 32370

so you will pay 40% on 6,088 this tax year

you have to add the interest and dividends, which are £200 + £150 = £350 gross.

Hence £45568 + £350 - £4880 - £34600 = £6438

Which is gross.

So you pay £6,438 from salary gross.

philng

So if I want to pay a lump sum for this tax year I send a chq for £6400 and will get the tax relief paid back to me? is this paid back by cheque from IR or via my tax code for the next tax yr?

philng

I assume I cant also claim back tax relief for previous year 2006/07 where my earnings were the same by making an additional payment this year?

meester

1. Yes, when you fill in your tax return.

2. You will get a cheque from HMRC when you complete your return. Best complete it sooner rather than later, as they owe you money.

3. No.

ossian

philng wrote: »

I assume I cant also claim back tax relief for previous year 2006/07 where my earnings were the same by making an additional payment this year?

Before A Day you could but not under the new pension rules sadly. However the cap on contributions is now 100% of salary (and maximum fund limit).

CLAPTON

philng wrote: »

So if I want to pay a lump sum for this tax year I send a chq for £6400 and will get the tax relief paid back to me? is this paid back by cheque from IR or via my tax code for the next tax yr?

No...it depends upon how the scheme works... is it part of your company schem or separate?

If it part of the works scheme then they may be able to deduct it gross from your salary.

.... otherwise it works like this

you pay 6400 X 0.8 = 5,120 and the AVC provider claims basic tax back so in your pension full has 6400 added. They will send you a certificate to say how much you have invested.
You then write to the tax man with the certificate (keep copy of course) and he send you a cheque for the 20% i.e. 1280

so you have spent 5120-1280 = 3,840 but had 6400 added to your pension fund
(assuming tax year 2008-9)