60% Tax over 100k - Pensions
Discussion
Looking for a bit of advice.... I appreciate this is a "nice" position to be in. This year my bonus has been better than expected and my total income is over £100k, so therefore hitting the 60% tax rate. Unfortunately I didn't know until the last day of March when it was paid so now need to make plans for it. I have thought about what to do with the amount over 100k and think pension is the best way forward. I'm 31, currently own a house and have no dependants, thinking about moving at the end of this year but I don't think the amounts we are talking about would make a difference. Pension contributions aren't that high, 11% in total, and bonus is not pensionable. Where I am stuck is the maths..... using rounded numbers say my total income was £110k and pension contributions to date £5k, therefore I've got £5k over the £100k thereshold. My understanding is (please correct me if I am wrong), I pay in X, the pension provider then adds in 20% tax relief to my pot and I can then via Self Assessment claim another 20% which will come back to me and not pension pot. So if I need to get down to £100k, I pay in £4k to my pension, pension provider via tax relief puts in £1k and then via SA I claim back another £1k. Is this correct? I would then be saying my Pension contribution was gross £5k and hence taxable income then £100k.
Swiss Panda said:
My understanding is (please correct me if I am wrong), I pay in X, the pension provider then adds in 20% tax relief to my pot and I can then via Self Assessment claim another 20% which will come back to me and not pension pot. So if I need to get down to £100k, I pay in £4k to my pension, pension provider via tax relief puts in £1k and then via SA I claim back another £1k. Is this correct? I would then be saying my Pension contribution was gross £5k and hence taxable income then £100k.
Yes, that maths looks about right to me But don’t forget to add on anything that might be on your p11d - eg health insurance or other benefits as this comes into play as well and adjusts the gross pay amount.
In principle you're right, I'm not sure if your 4k is correct or it needs to be the 5k overs. someone more qualified will know I guess.
But, you don't need to do a self assessment. if the relief claimed is >10k you need to post in proof of the payment, less than you can do it online
What have you done about caliming the extra 20% tax relief on your regular pension payments?
And for next year, you can ask your employer to increase your contribution (not theirs) by an amount that will bring you in under 100k. Then tell the revenue and they will adjust your tax code to give you the relief in your wages rather than having to do it all again next year.
But, you don't need to do a self assessment. if the relief claimed is >10k you need to post in proof of the payment, less than you can do it online
What have you done about caliming the extra 20% tax relief on your regular pension payments?
And for next year, you can ask your employer to increase your contribution (not theirs) by an amount that will bring you in under 100k. Then tell the revenue and they will adjust your tax code to give you the relief in your wages rather than having to do it all again next year.
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