Pension allowance question for high earners (+350k)

[MsRollersk8er]

Hi due to a bonus this year I am lucky to be earning enough that means I will lose my pension allowance for this year. This is the first time my bonus has been at this level to have this impact. Are there any other mumsnetters out that that are in the situation where your high earnings have reduced your allowance to zero - if so - what have you done instead? I assume there is no point paying into the pension as would need to pay a tax charge? Would I be able to roll my allowance for the last 3 years to give me a bigger allowance this year? If I pay into a pension on behalf if partner does that count to reduce my earnings? I appreciate this is a very lucky problem to have so any advice would be appreciated thanks.

Your annual allowance wont be zero. It reduces by £1 for every £2 of income you have above £260,000, down to a minimum of £10,000

So if your income is £350,000, then your pension allowance is reduced by £45,000, giving you an allowance of £15,000 (reduced down from £60,000)

You can carry forward unused allowance from the previous 3 tax years - there are a number of online calculators you can use to check how much

On your final question, you can't pay into a pension on behalf of someone else

Hi thanks for this - I think I can offset with the last 3 years which will help. I also thought paying into someone else’s pension was classed as third party pension contributions. I’ve seen people pushing it as a way to maximise allowances between couples but maybe that’s just for married people?

Do people just pay tax on the amount above the allowance or do they invest in other things?

After using carry forward, it will usually work out to be a gain to pay in the maximum that your employer will match, even if it takes you above the max tapered amount, as that free money will often outweigh the tax charge (but it will depend on your individual situation).

Most top rate earners will then max out a LISA if they are under 40 (£4k), S&S ISA (£16k if you have used a LISA, £20k if not), and then might consider a general investment account (which is taxed as capital gains, so 24% max with a 3k allowance per year). If you have a partner you'll each have the LISA/ISA/CGT allowances.

Your partner can pay into their pension up to their taxable earnings (or £60k, whichever is lower). The tax relief is based their income (so if they are a basic rate taxpayer, it will attract basic rate tax relief, even if you gift them the money to pay it in or if it comes out of your joint account). In retirement, you can then get better use out of your tax allowances by drawing down more equal amounts (rather than one person having a big pension and going into the higher rate band).
If you are unmarried, you have to be careful though as you're effectively gifting them the money and it won't be seen as joint assets the way it would if you were married.

There are also other schemes like EIS and VCTs, but I've not considered them. As a couple we are maxing out our main property (by spending at the top end of our budget and renovating) as PPR means a tax-free gain when we downsize.

Previous poster’s summary covers a lot already.

I would add that if you have kids you can also save for your children tax-efficiently - you can put £2,880 per child into a pension and the government will add 20% tax relief, and they can save us to £9k per year in a junior ISA with any interest and gains tax-free. Though note they will be able to access the money from the latter at 18, so needs to go hand in hand with good financial education.