Short Term Pension Contribution

[brian_H]

Hi everyone

I am after a bit of guidance. I am going to seek professional help but I thought I would ask the PH lot for their opinion.

My wife and I are looking to move house and I am taking my 25% tax free from my private pension in September to part fund the house move. I was wondering how much of my house money savings could I pay into my pension to claim the tax relief between now and early September?

My current employer and I currently pay in a combined £9264 per year into my works based pension.

I have not made any other contributions since April 4 2022.

I believe I can also backdate some of my un used allowances for the last 3 years.

I am just wondering, is this a minefield or is it worth paying my house money (up to my limits) for 6 weeks to get the governments 20% contribution, knowing I will have to pay tax later on the 75% remaining.

I am not a higher rate tax payer with 0 kids if that is pertinent.

Unfortunately my brain isn't large enough to work this out!

If anyone can help I would be very grateful

Thank you

Brian

[CraigyMc]

brian_H said:

Hi everyone

I am after a bit of guidance. I am going to seek professional help but I thought I would ask the PH lot for their opinion.

My wife and I are looking to move house and I am taking my 25% tax free from my private pension in September to part fund the house move. I was wondering how much of my house money savings could I pay into my pension to claim the tax relief between now and early September?

My current employer and I currently pay in a combined £9264 per year into my works based pension.

I have not made any other contributions since April 4 2022.

I believe I can also backdate some of my un used allowances for the last 3 years.

I am just wondering, is this a minefield or is it worth paying my house money (up to my limits) for 6 weeks to get the governments 20% contribution, knowing I will have to pay tax later on the 75% remaining.

I am not a higher rate tax payer with 0 kids if that is pertinent.

Unfortunately my brain isn't large enough to work this out!

If anyone can help I would be very grateful

Thank you

Brian

Depends on the last few years contributions, as well as this years.

This year you can cap out at 60K. Last year you could also cap out at 60K. The year before that you could cap out at 40K, and the year before that also 40K.

You can use previous years allowances to top up this year.

You can't go below minimum wage if redirecting salary to an employer's scheme.

You should 100% get advice on this from a professional.

[Ken Figenus]

Interesting as I'm questioning the same - volunteering tax free cash to be taxed down the line in return for that 20% boost... I'm assuming you are PAYE and not a director? If you are on 40% tax it could well be worthwhile esp if you will limit your later years drawdown to below higher rate tax.

[Rufus Stone]

brian_H said:

Hi everyone

I am after a bit of guidance. I am going to seek professional help but I thought I would ask the PH lot for their opinion.

My wife and I are looking to move house and I am taking my 25% tax free from my private pension in September to part fund the house move. I was wondering how much of my house money savings could I pay into my pension to claim the tax relief between now and early September?

My current employer and I currently pay in a combined £9264 per year into my works based pension.

I have not made any other contributions since April 4 2022.

I believe I can also backdate some of my un used allowances for the last 3 years.

I am just wondering, is this a minefield or is it worth paying my house money (up to my limits) for 6 weeks to get the governments 20% contribution, knowing I will have to pay tax later on the 75% remaining.

I am not a higher rate tax payer with 0 kids if that is pertinent.

Unfortunately my brain isn't large enough to work this out!

If anyone can help I would be very grateful

Thank you

Brian

Your maximum contribution will be your net relevant earnings for the tax year. As you are not a 40% tax payer you will not have sufficient earnings to use any carry forward allowance.

[supersport]

Quite apart from the fact that you can only pay in gross up to this year's earnings, which as said above if you are a basic rate tax payer is going to be £50K.

I am not sure that the maths make much sense.

If you need the full 25% to cover the cost of moving, how can paying in the cash you have to a pension make any sense?

If you paid in £100K you're only going to get £25K of that back, so I assume you wouldn't have enough for the house move.

[brian_H]

Thanks everyone......it was just an idea....and not a particularly good one by the sound of things

Cheers

[Sheepshanks]

It might work. How vital is the timing of getting the money back? The payout might not be particularly instant.

Once you've taken the money, you're usually limited to putting £10K/yr in.

[omniflow]

Sheepshanks said:

It might work. How vital is the timing of getting the money back? The payout might not be particularly instant.

Once you've taken the money, you're usually limited to putting £10K/yr in.

Wrong.

If you ONLY take the tax free lump sum then the limit for contributions doesn't apply.

[Sheepshanks]

omniflow said:

Sheepshanks said:

It might work. How vital is the timing of getting the money back? The payout might not be particularly instant.

Once you've taken the money, you're usually limited to putting £10K/yr in.

Wrong.

If you ONLY take the tax free lump sum then the limit for contributions doesn't apply.

Ah, OK - that's better for the OP then.

[Dashnine]

Is what the OP planning not pension recycling - in that contributions will rise beyond normal whilst taking a large lump sum?