Tapering of personal allowance

[mx stu]

Looking for someone to clarify, as our payroll person couldn't.

Whilst the tapering of the PA has been around for a while it's going to bite me going forward as I've previously managed my pension contributions to avoid it being a problem. However due to the annual pension contribution cap it looks like I'll lose all my personal allowance going forward.

I asked our payroll person to run a dummy end of July payroll and the net figure was higher than I expected by probably the monthly 'benefit' of having a personal allowance. My questions is therefore will this ever be adjusted for through payroll (during the tax year or after submission of this years self assessment?) or will I always get more through payroll and just have to pay it over with my self assessment bill.

[Eric Mc]

These complex adjustments based on likely future earnings are notoriously difficult for PAYE to cope with - as you do not start losing your allowances until your accumulated salary starts to exceed the threshold.
Do you know when that will actually occur?

[mx stu]

Eric Mc said:

These complex adjustments based on likely future earnings are notoriously difficult for PAYE to cope with - as you do not start losing your allowances until your accumulated salary starts to exceed the threshold.
Do you know when that will actually occur?

On an accumulated basis I calculate I'll go through threshold in month 10 (of the tax year) and the whole personal allowance will be gone when paid in month 12. Presumably those two paydays won't be adjusted completely to take c.£4k in additional tax?

anonymous said:

[redacted]

I did think about updating on the gateway but I've had problems in the past when I've done this, insofar as the system kept making completely spurious changes and in the end I spent a fair amount of time on the phone to HMRC trying to sort it out!

[NickCQ]

There is always the option of "see what happens and fix it when filling in your self assessment"? The pension allowances roll over for a few years so you will have a chance to true it up later. Just make sure you have £5-10k on hand in January if it's gone badly wrong (ask me how I know )

[mx stu]

NickCQ said:

There is always the option of "see what happens and fix it when filling in your self assessment"? The pension allowances roll over for a few years so you will have a chance to true it up later. Just make sure you have £5-10k on hand in January if it's gone badly wrong (ask me how I know )

That's what I'm favouring, the worry about it when paying your self-assessment not the going wrong part ;-)

I'm just thinking through whether it's worth dripping the 'extra' £400 per month into something like Vanguard LS60 (trying to keep it away from actual savings) knowing that I won't have to pay it over until 31 Jan 2023. If payroll start adjusting for it there is the potential that I'll have to pull it out before it's had a chance to do anything.

[NickCQ]

mx stu said:

I'm just thinking through whether it's worth dripping the 'extra' £400 per month into something like Vanguard LS60 (trying to keep it away from actual savings) knowing that I won't have to pay it over until 31 Jan 2023.

Yeah, 60/40 equity/bonds split makes sense if you think the worse case scenario is paying a 40% tax bill, even better if you have unusued S&S ISA allowances.

[alistair1234]

Where people have suggested to wait until you are doing your self assessment and fix it then, I thought you couldn't stick it in a SIPP in the following tax year but get relief for the previous even if you had some unused allowance?

That's what HMRC advised me when I asked them.

I thought you had to work it out before April 5th and make any final contributions then.