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  • FIRST POST
    • DrHyde
    • By DrHyde 10th Mar 18, 9:38 PM
    • 5Posts
    • 2Thanks
    DrHyde
    Should I make a one-off payment to workpl pension?
    • #1
    • 10th Mar 18, 9:38 PM
    Should I make a one-off payment to workpl pension? 10th Mar 18 at 9:38 PM
    Hi there,
    I have a funny "problem" in that a recent bonus I received would make me a higher-rate tax payer. I wonder if by making a single contribution into my workplace pension scheme would classify me again as a basic rate taxpayer.
    The below figures are made up, but just to illustrate.
    I earn 47,000 pa but make contributions of 2,500 into my workplace scheme so I understand I'm classified basic rate payer because when deducting my contributions from my gross salary I'm under the 45,000 threshold.
    Now I received a bonus of 5,000 of which nothing goes into my workplace scheme - and that's why I become that higher rate tax payer.
    Can I put this bonus into my workplace pension to then be classified basic rate taxpayer again?
    Would I benefit from the 20% top up - ie, 5,000 essentially become 6,000?
    Thank you for your tips!
    DrH
Page 1
    • Alexland
    • By Alexland 10th Mar 18, 10:12 PM
    • 2,585 Posts
    • 1,961 Thanks
    Alexland
    • #2
    • 10th Mar 18, 10:12 PM
    • #2
    • 10th Mar 18, 10:12 PM
    Sure if your employer can process it as a one off pension contribution before the end of the tax year. I throw all my bonuses at the pension to avoid 40% tax. If your bonus was 5k you wouldn't get 6k you would just avoid paying tax on the 5k.
    • Paul_Herring
    • By Paul_Herring 11th Mar 18, 12:01 AM
    • 6,301 Posts
    • 3,012 Thanks
    Paul_Herring
    • #3
    • 11th Mar 18, 12:01 AM
    • #3
    • 11th Mar 18, 12:01 AM
    Can I put this bonus into my workplace pension to then be classified basic rate taxpayer again?
    That's exactly what I did recently, but...

    Would I benefit from the 20% top up - ie, 5,000 essentially become 6,000?
    How are contributions normally made? By salary sacrifice, net pay scheme, or from your net pay after calculations?

    If by salary sacrifice or net pay scheme, then it won't be taxed to start with, so there's no 'top up' to be reclaimed.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • Alexland
    • By Alexland 11th Mar 18, 7:48 AM
    • 2,585 Posts
    • 1,961 Thanks
    Alexland
    • #4
    • 11th Mar 18, 7:48 AM
    • #4
    • 11th Mar 18, 7:48 AM
    Even if your employer cannot process it via payroll (for example you have already received it and they won't pay you enough in the remainder of this tax year to put that income into the pension) you could still put money into a personal pension and claim the higher rate tax back via self assessment.
    • starkiwi26
    • By starkiwi26 11th Mar 18, 9:59 AM
    • 60 Posts
    • 13 Thanks
    starkiwi26
    • #5
    • 11th Mar 18, 9:59 AM
    • #5
    • 11th Mar 18, 9:59 AM
    As a thumb of rule (not 100% accurate, because some income/benefit is taxable but not NIable, but this rule is good enough for reference):
    Taxable income between 11.5k - 45k are taxed and NIed at 32%
    Taxable income between 45k - 100k are taxed and NIed at 42%

    As you are at higher tax band,
    therefore any 1 you sacrifice on your take home income, give you value of 1.72 of pension. This is not including your employer's subsidy.

    Short answer to you, yes, my advice is you should. Because this is 70% profit the moment you put to the pension. This is a loophole the government purposely and intentionally leave it open, to encourage ordinary people likes you and me to escape tax by saving to the pension pot. BUT, while it is very profitable as I mentioned above, please be aware that, depending on your age, you may have to wait decades before I can touch the pension pot. Personally, I am happy to drink less beers and put more money to pension contribution instead.

    If my answer above clarifies your doubt, please click the "Thank you" button. I learned a lot from fellow MSE members here, it is time to contribute back.
    Last edited by starkiwi26; 12-03-2018 at 9:55 PM.
    • Dazed and confused
    • By Dazed and confused 11th Mar 18, 10:31 AM
    • 2,644 Posts
    • 1,267 Thanks
    Dazed and confused
    • #6
    • 11th Mar 18, 10:31 AM
    • #6
    • 11th Mar 18, 10:31 AM
    Taxable income between 45k - 150k are taxed and NIed at 42%

    Whilst technically correct don't forget that income between 100k and 123k has the additional 20% tax hit due to loss of the personal allowance
    • starkiwi26
    • By starkiwi26 12th Mar 18, 9:56 PM
    • 60 Posts
    • 13 Thanks
    starkiwi26
    • #7
    • 12th Mar 18, 9:56 PM
    • #7
    • 12th Mar 18, 9:56 PM
    Taxable income between 45k - 150k are taxed and NIed at 42%

    Whilst technically correct don't forget that income between 100k and 123k has the additional 20% tax hit due to loss of the personal allowance
    Originally posted by Dazed and confused
    ok you are right. my salary is nowhere near 100k, so I never consider that factor. I updated my thumb of rule: Taxable income between 45k - 100k are taxed and NIed at 42%
    • Alexland
    • By Alexland 12th Mar 18, 10:40 PM
    • 2,585 Posts
    • 1,961 Thanks
    Alexland
    • #8
    • 12th Mar 18, 10:40 PM
    • #8
    • 12th Mar 18, 10:40 PM
    Also remember it is different in Scotland.
    • atush
    • By atush 13th Mar 18, 1:29 PM
    • 16,814 Posts
    • 10,493 Thanks
    atush
    • #9
    • 13th Mar 18, 1:29 PM
    • #9
    • 13th Mar 18, 1:29 PM
    and you will have to contact HMRC to tell them about your pension contrib to get the HRT back. Or include it if you do self assessment
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