How much to put in pension? Higher rate taxpayer but not by much!

[YourIcyGreyFinch]

Hello

I've had a payrise and am now on £50k. So I'm a higher rate taxpayer for the first time. Yippee!

My monthly employee pension contribution is £145. 20% tax relief added at source (£30). Employer pays in a fixed % regardless of what I put in so no considerations re matching.

I want to make an additional contribution but only the amount that is worthwhile to get the extra 20% tax relief. As I believe you can't get more tax relief than the tax you actually paid in the first place.

How do I work this out please?

Thanks

Hi, congrats on the payrise 😁you may want to check if you are higher tax payer, is your gross salary 50k exactly? Do you get any bonuses, BIK, is your personal allowance reduced etc?

I only ask as assuming you have your full personal allowance you only pay 40% tax on income above £50,271 so a gross of 50k with no adjustments mean you are still paying 20% tax...😁

Also this website is really useful for playing with pension increase scenarios and take home. If you click on breakdown it will show how much income is at the different rates

You’re not a higher rate tax payer until £50,271 - sorry to nitpick, but just mentioning in case that affects your calculations!

this might help?
“You can get tax relief on private pension contributions worth up to 100% of your annual earnings.”
www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Your £145 a month contribution might already take you below the higher rate tax threshold btw if it’s paid from your gross salary - £145 x 12 = £1,740.00

£50k - £1,740 = £48,260 taxable income.

Sorry should have said that I'm in Scotland

Google tells me the following:

£25,689 to £43,662
21%
Intermediate rate

£25,689 to £43,662
21%
Intermediate rate

Thanks. No, salary contribs are not salary sacrificed.

*pension contribs sorry

My keyboard is playing up, apologies!

£43,663 to £125,140
42%
Higher rate

Thanks for the link. Seems awfully generous of the Government to give you more tax relief than the tax you have actually paid tho?!!

Okay, so you have £6.3k ish at the higher rate because you are in Scotland.

So anything up to £6.3k will reduce the amount you have in the higher rate band.

So as you currently pay in £1,740 (plus whatever your employer pays in, I get you say that that is fixed but it is relevant in terms of how much you "should" be paying in), this is currently 3.5% of your income.

And £6.3k-£1.7k = £4.4k

So up to an additional £4.4k would all be at the higher rate band.

@Ineffable23 thanks so much! Just gotta make sure I have that to hand by April next year! Bad timing in a way as I just bought a house! But nice problem to have I suppose!