Pension Tapered Annual Allowance

[BatForcePC]

Hello All,
This tax year it looks like my earnings are going to push me well into the tapered annual allowance territory and will have to pay tax on the difference between my allowance and contributions come self assessment time. I've used all previous years allowances so I can't see a way of escaping the bill. Anyway I can see a couple of options and would be grateful of any advice...

I see a couple of options;
Stop my pension contributions now (combination of salary sacrifice & company contribution) to reduce the total going in this tax year and therefore my tax bill next year - the company will add their contribution to my salary also - this will increase my take home pay but also NI and Income Tax.

Keep the contributions as is and accept that I will have a larger tax bill come Self Assessment

I think the latter makes more sense as I get NI relief via the salary sacrifice which is added to the contribution and if I stop contributions and add it to my salary I get stung on NI...

[Mogul]

If your pension contributions are arranged under SS then 100% of whatever it is that the company puts in will be considered as the Company’s contribution, whether or not you have ‘exchanged’ some gross pay for a larger Company pension contribution. The NI savings are there for the taking (but it depends on how generous your employer is and if they give you 100% or just 50% of it etc.)

Not sure there is much you can do to mitigate the Tapered Annual Allowance but if your pension is full/rapidly filling up, and you are more allergic to the going rate of income tax than you are to investment risk, there are some ‘tax-reducers’ out there that you could look into: VCT, EIS, SEIS etc.

[BatForcePC]

Mogul said:

Not sure there is much you can do to mitigate the Tapered Annual Allowance but if your pension is full/rapidly filling up, and you are more allergic to the going rate of income tax than you are to investment risk, there are some ‘tax-reducers’ out there that you could look into: VCT, EIS, SEIS etc.

Thanks Mogul, my company has offered to pay me their pension contribution as salary in order to reduce my exposure to the tapered annual allowance - with this in mind the "tax-reducers" are interesting - I looked at them a few years ago when we sold a business but it didn't make a lot of sense for me at the time and I was a bit put off by the lack of liquidity in the investments - I was young, just started a family.... today I'm still youngish but things are more established on the family front...problem is I wouldn't know where to start with VCT's, EIS's etc, particularly identifying investments that are interesting to me....

[ziontrain]

You might want to check if "Scheme Pays" is available, so the tax hit comes from the pension pot rather than your wallet.

[BatForcePC]

ziontrain said:

You might want to check if "Scheme Pays" is available, so the tax hit comes from the pension pot rather than your wallet.

Thanks - yes "Scheme Pays" is available as long as I get this all sorted before July I think...