Pension contribution advice - over £100K earner and reduced annual allowance

Does your company operate a salary sacrifice scheme? If they do then salary sacrifice an amount each month to take you below 100K pa. You therefore save 42% in tax and NI which all goes into your pension and get your full personal allowance back.


In addition some employers will give you some or all of their employER NI saving to put into your pension as well.

You cannot claim a specific "high rate tax relief"

Pension contributions usually attract tax relief in one of two ways,
1). They are deducted by your employer before tax is calculated i.e. salary is £100,00 with 10% pension contribution so your taxable salary is £90,000. It's the £90,000 that shows up on your P60.

2). You pay into a personal pension/SIPP. If you paid £10,000 the pension company would automatically add basic rate tax relief of £2,500 making a gross contribution of £12,500 in your pension fund.

With 1) there is no further tax relief to claim, it has reduced your taxable income saving the tax immediately.

With 2) you notify HMRC of the gross contribution (£12,500) as part of completing your Self Assessment return* and any additional tax relief due is given by the gross contribution increasing the amount of your basic rate tax band. This is turn can reduce the amount of higher rate tax payable.
*some people who don't have to file Self Assessment returns can claim just by contacting HMRC by phone/letter

If you want to see how much extra tax relief you have benefited by all you need to do is complete your tax return without this pension contribution and note the tax due/repayable. Then add in the pension contribution and look at the revised calculation. The difference between the original and revised calculation is the additional tax relief you have benefited from.

You might want to google "adjusted net income" in respect to the Personal Allowance. The amount of Personal Allowance isn't based on your taxable income but is based on your adjusted net income. This could mean you have taxable income of £113,000 and still get the full Personal Allowance if pension contributions (under point 2 above) bring your adjusted net income down to £100k or less.

There is the potential to get 60% tax relief on pension contributions in these circumstances, 20% relief at source, 20% additional relief as you pay more basic rate and less higher rate and another 20% because you get your Personal Allowance back.

You might want have a play around with your 2017:18 Self Assessment return/calculation before filing it just to see the impact of pension contributions in different circumstances.