Exceeding annual allowance through AVCs

[Mike76]

I want to make a 30k AVC this tax year which will take my pension contributions to 55k. This will take me above the £40k annual limit. I can c/f limits from previous years as I haven't made more than £2k per annum of conts in 14/15 or 15/16.

My questions are:
- can I claim the b/f allowance through my self assessment form for 16/17 or is this more complex? Is this something the pension company will do. The AVC will not be paid as a payroll deduction.
- The additional AVC should reduce my taxable pay from 125k to £95k. Does this mean I will get a 60% tax benefit as I will recover my personal allowance as well as the 40% or is this limited to the 40% tax benefit only.

Thanks in advance for any advice received.

Mike

[AmanSood]

Hi Mike

In response to your queries,

1) With the b/f allowance, you simply need to prepare your own calculation to work out the amount of the allowance available in the relevant tax year. If based on this you do not exceed the allowance limit, then there's no additional tax to pay on your pension contributions/nothing to report on your tax return;

2) Yes making additional voluntary contributions will lower your adjusted taxable income to below £100,000 and therefore giving you the benefit of the full personal allowance which you can claim when you file your tax return.

On a related note, have you spoken to your employer about pensions salary sacrifice? This would result in additional savings for both you and your employer as you wouldn't be paying any NIC and therefore something worth raising with your employer if you haven't already done so.

Thanks

Aman

[Mike76]

Thanks for your advice Aman. Mike