Decreasing pension contribution but does that mean more tax payment

[taxask]

I need to try to get more take-home money so was looking at decreasing my pension contribution but wasn't too sure if that would have an adverse affect with the "supertax bracket" (100k-125k) and if I would end up paying more tax.

[kbmtraining]

If you're in the £100K–£125K range, reducing pension contributions could increase your tax due to the 60% effective tax rate (40% income tax + loss of Personal Allowance). The key points are as follows:

1. Earning over £100K reduces your £12,570 tax-free Personal Allowance by £1 for every £2 over.
2. This creates a 60% tax trap in the £100K–£125K range.
3. Pension contributions lower adjusted net income, helping you retain more of your Personal Allowance and reduce tax.

Example: Earning £110K?

1. Without pension contributions: £5K of your Personal Allowance is lost.
2. With a £10K pension contribution: ANI drops to £100K, restoring full allowance and saving £4K tax.

Bottom line: Reducing pension contributions might increase tax rather than boost take-home pay. If close to £100K, keeping or increasing contributions may be more tax-efficient.

If you need information you can contact our office on this email address. contactus@kbmtr.com

[AGoodman]

If your income remains static but you pay less into your pension, then your taxable income will go up.

Whether that takes you over £100k depends on the numbers. If you do go over then you will lose some of your personal allowance, with the effect that the excess over £100k suffers the effective 60% rate.

[someone]

Note that yes you will pay more tax but yes you will have more take home pay. (With a handful of exceptions related to HICBC if you have lots of children or pension taper if you're very close to the threshold income where it doesn't apply)

The problem with the "supertax bracket" is that for every 1GBP less you put into your pension, you only end up with 40p more in your pocket.

Also be aware that if you get relief via your tax return rather than as a result of salary sacrifice or net pay then when you change the amount you pay you might get back more than you should in the short term and then have to make up the difference when you pay your balancing tax bill at end Jan.
(For example, if you earn 112K and pay 1K per month into your pension, not paying in that 1K might see your take home go up by 0.6K but once you do your tax return you'll get a 2.4K bill to pay as your taxcode will probably not take account of the reduction in personal allowance in the year that you make the change)

[taxask]

Note that yes you will pay more tax but yes you will have more take home pay. (With a handful of exceptions related to HICBC if you have lots of children or pension taper if you're very close to the threshold income where it doesn't apply)

The problem with the "supertax bracket" is that for every 1GBP less you put into your pension, you only end up with 40p more in your pocket.

Also be aware that if you get relief via your tax return rather than as a result of salary sacrifice or net pay then when you change the amount you pay you might get back more than you should in the short term and then have to make up the difference when you pay your balancing tax bill at end Jan.
(For example, if you earn 112K and pay 1K per month into your pension, not paying in that 1K might see your take home go up by 0.6K but once you do your tax return you'll get a 2.4K bill to pay as your taxcode will probably not take account of the reduction in personal allowance in the year that you make the change)

Ah, thank you for the detailed information: that’s very handy. A few things to think about then … thank you

[taxask]

If your income remains static but you pay less into your pension, then your taxable income will go up.

Whether that takes you over £100k depends on the numbers. If you do go over then you will lose some of your personal allowance, with the effect that the excess over £100k suffers the effective 60% rate.

Ah I see, thank you.