Hello Folks,
I hope I can get some help from the experts here to understand the max allowable pension contributions allowed this tax year. Thanks for reading.
My annual salary is 110k. But this tax year, I will only be receiving payslips for Jan, Feb, March so tax year gross will be: 27 500.01
I've spoken to HMRC who have confirmed this puts me in the 20% tax braket, not the 40% one this tax year.
I intend to compliment my workplace pension by contributing into a SIPP.
I understand that my max pension contribution will be 27500.1 which will be used instead of the 40k max allowance.
My company pays 758.63 each month into a workplace group pension via salary sacrifice. This is the total employer and employee contribution.
(I think this number is inclusive of any tax relief, or an untaxed payment).
So the total contribution this tax year into pensions from all sources will be 2275.89.
I think that leaves my remaining monthly allowance to be 27500.1 - 2275.89 = 25224.12.
Tax Relief should top up by 25% to reach 27500.1, so I understand I can contribute 20179.29 this tax year and benefit from the tax relief.
Does that look about right to you?
I'm curious about the rule where you can use a previous years tax relief allowance in a current year.
Since I'll be in the 40% tax bracket next year, would it be better for me hold back my contributions until the next tax year?
For next year would that effectively mean I could add this years unused allowance in next years contribution, and benefit from 40% tax relief from a max of 40k for 2021/2022 and 40% on 25224.12 for 2020/2021.
Thank you,
Jak
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