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    • nine
    • By nine 14th Sep 18, 4:22 PM
    • 11Posts
    • 0Thanks
    nine
    how much to contribute to pension?
    • #1
    • 14th Sep 18, 4:22 PM
    how much to contribute to pension? 14th Sep 18 at 4:22 PM
    Hi - I'm trying to understand how much I should contribute to my pension, so that I minimise the amount of tax I pay.

    Salary: 42,600
    Bonus: 6,200 (this isn't guaranteed but we almost always got it - payable in January each year)
    Medical insurance 1550 (taxable benefit)

    At the moment, I'm only contributing 100 per month to a pension plan (and my employer also adds 320 - but from what I understand the employer contribution that doesn't affect my taxes). For these 100 I get an automatic tax relief of 20% I believe.

    Two questions really:
    1. how much should I pay to the pension plan so that I avoid being considered a higher rate tax payer?
    2. is there any way to get extra tax relief on the money I contribute to the pension? how would I go about it?

    Thank you!
    Last edited by nine; 14-09-2018 at 4:55 PM.
Page 2
    • nine
    • By nine 14th Sep 18, 6:52 PM
    • 11 Posts
    • 0 Thanks
    nine
    For last year it looks as though you will have paid 40% tax on 750 so your pension contribution (assuming you paid at least 750 gross) will allow this 750 to be taxed at 20% instead of 40% potentially saving you 150.

    There should be no need to file a return for this, just tell HMRC about the pension payments in 2017:18 and they will send you a calculation and refund of any tax overpaid last year.

    As your latest post has dropped your 2018:19 income by 4k you won't be paying any 40% tax in the current tax year.
    Originally posted by Dazed and confused
    Thank you! I will ring HMRC next week see what they say re 2017/2018. I paid 1200 into the pension, and got 300 tax relief (the 20%).

    That was a typo sorry - it should have been 48.8K..

    expected 2018/2019:
    48800 on p60
    plus the 1550 health insurance
    • nine
    • By nine 14th Sep 18, 7:17 PM
    • 11 Posts
    • 0 Thanks
    nine
    You can just call HMRC, probably simpler if you wait until the end of the tax year.
    Originally posted by Albermarle
    Just saw this one. I do need to wait until the end of 2018-19 tax year to claim extra tax relief for my pension contributions... as my base salary is 42,600 and bonus of 6200 is not guaranteed... so in the eyes of HMRC I'm a basic tax payer for now, right? I will get the bonus in Jan 2019.
    • Dazed and confused
    • By Dazed and confused 14th Sep 18, 7:37 PM
    • 3,188 Posts
    • 1,591 Thanks
    Dazed and confused
    You can provide them with an estimate of your taxable wages for the year (you can do it online through your personal tax account if you want) and then the revised tax code should include the pension tax relief due for the current tax year but if the bonus doesn't materialise then you will have a tax debt to pay back.
    • Dazed and confused
    • By Dazed and confused 14th Sep 18, 7:39 PM
    • 3,188 Posts
    • 1,591 Thanks
    Dazed and confused
    Thank you! I will ring HMRC next week see what they say re 2017/2018. I paid 1200 into the pension, and got 300 tax relief (the 20%).

    That was a typo sorry - it should have been 48.8K..

    expected 2018/2019:
    48800 on p60
    plus the 1550 health insurance
    Originally posted by nine
    Then the figures in post #9 still apply (assuming you don't have any other undisclosed income such as savings interest or dividends)
    • nine
    • By nine 15th Sep 18, 8:59 AM
    • 11 Posts
    • 0 Thanks
    nine
    Thank you all!
    • AnotherJoe
    • By AnotherJoe 15th Sep 18, 9:41 AM
    • 11,408 Posts
    • 13,177 Thanks
    AnotherJoe
    As you are a higher rate taxpayer , basic rate tax relief should be added on by the pension company and then you have to claim back the higher rate element from HMRC. They will send you a tax rebate and/or adjust for it in your tax code.
    So for each 100 you contribute , the pension company should add 25 and then you will get another 25 back at a later stage when you claim for it .
    The amount you are putting in is a bit on the low side and your current pension pot is very low for your age. As you can see pension contributions are very advantageous for a higher rate taxpayer , so increasing your contributions would be a very good idea all round.
    Originally posted by Albermarle
    Op should not be claiming for tax relief on pension contributions to a company scheme, the payroll should take account of that.

    I agree, OP isn't putting anything near enough in, amd rather than agonise about how much they "should" be puttimg in the answer is as much as they can afford without seriously impacting their current quality of life.

    OP if you want to retire "now" which I realise was likely tongue in cheek,but to speed that day forward, the simple answer is to adjust your lifestyle so you spend less, and save more, definiteky into a pension if yiu area higher rate taxpayer. . Do not make the other classic mistake of overpaying a mortgage, your normal payments helped along by time and inflation will take care of that but your income in retirement won't take care of itself.
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