Personal Allowance

[deepam]

I want some clarification regarding personal allowance. To explain with an example - if I earn 125k and put 25k into work pension (which is not taxable), do I get £11700 as personal allowance as my taxable income now will be 100k? My understanding is that there is no personal allowance above 123k

[robbob]

I want some clarification regarding personal allowance. To explain with an example - if I earn 125k and put 25k into work pension (which is not taxable), do I get £11700 as personal allowance as my taxable income now will be 100k?

Yes - pension payments made "by you" either reduce your taxable pay (employee payments as deduction from your gross salary) to the 100k level - or reduce your "adjusted net income" to 100k if they are pension payments via deduction from net salary or paid directly via you.

Either way your adjusted net income will be the same at 100k and therefore you will received the personal allowance in full presuming you have no other income.

https://www.gov.uk/guidance/adjusted-net-income

There is a warning here though that if your "threshold income" exceeds 110k and your "adjusted income" (not to be confused with "adjusted net income"!) exceeds 150k then there could be issues if your overall level of pension contributions exceeds the relevant annual allowance - this could trigger an adverse tax charge - so there can be a sting in the tail. From the figures mentioned above in isolation you are probably fine in that regard but the level of employers pensions - salary sacrifice amounts and possibly growth in pension can all have a bearing on these calculations depending on your particular circumstances.


https://www.youinvest.co.uk/sites/default/files/AJBYI_Guide_to_annual_allowance_tapering.pdf