Hi,
I have been trying to understand how taxable income works and how to calculate the optimal pension contributions for my unique circumstances this financial year (2019-2020). I find myself in a position (just for this financial year) to have a PAYE income in the range of 160k and am trying to find the amount I can put into my pension so as not to loose too much of my income to tax. I did come across this as a guide to pension contributions - https://www.youinvest.co.uk/sites/default/files/AJBYI_Guide_to_annual_allowance_tapering.pdf
And based on this have come up with the following calculation breakdown:
PAYE Income = 160,000
Employer pension contribution (at 5%) = 8000
Pension contribution = 60000 (i.e. 40,000 current year + 20,000 carry over from previous year)
Which results in,
adjusted income = 168,000
threshold income = 108,000 (168,000 - 60000)
Therefore no tapering of pension allowance as the threshold is less than 110k.
So the final total deductions for the year = 33,464.16 (i.e. 27,500 income tax + 5964.16 NI)
So net income = 66,535.84 (i.e. 160,000 - 60,000 - 33,464.16)
I would like to know if my calculations here are correct and would appreciate any insights into anything I may be missing here.
One thing I am not quite sure about in the above is with regard to the 40k annual limit (does this include the employer contribution and/or any other contributions? and if so does this mean the actual amount I can contribute would actually be 32,000 i.e. 40,000 - 8,000?)
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