Income Tax & £100k income threshold

[gsr121]

I have an income tax question regarding using a SIPP to reduce tax burden. My aim is to ensure my declared income does not go over £100,000 so that my personal allowance is not eroded.

For 2023/2024, I have successfully done this by diverting some of my employed (PAYE) income into my company pension. My expected P60 income will be £100,000.

However, next month within the 23/24 tax year, unexpectedly I am getting a £7,500 bonus from my employer. For various reasons I cannot divert this to my company pension. There are no other salary sacrifice options to use.

However, I do have a SIPP which I can use. From my research, the SIPP manager (AJ Bell) will gross this up by 20%.

The main thing I would like to know is how do I do this to ensure that my income does not go over £100,000? Because AJ Bell gross the amount up by 20% I am concerned that my income might still be considered to be £107,500 for tax calculation purposes.

My P60 taking into account the will show income of £107,500, and I am concerned that I will start losing my personal tax allowance.

Thanks for the advice.

[trumpton7291]

Just pay 80% of the bonus into the SIPP.

[Scabutz]

Pay it in to the SIPP then do a tax return to claim the higher rate tax back

[gsr121]

Thanks for the above. I know in normal circumstances that is the way to do it, but can I just check that doing it this way will keep my taxable income below £100k and therefore I don’t lose any of my personal allowance?

Not questioning your responses, just want to make sure I’m understanding correctly.

Thanks

[Scabutz]

Yes it will. Your P60 will say you have earned over because your employer doesn't know you've put it in a pension. When you do your tax return you put the figure from your P60, then add you pensions contributions into the SIPP and it will take the pension contributions off your salary.

[gsr121]

Brilliant, many thanks

[Scabutz]

Also note the threshold for having to do a tax return has increased from 100k to 150k so you'll have to be pro active. If you've done one before just login and file one. If you haven't you'll need to contact HMRC and tell them you need to do one.