I have a question about higher rate tax and pension contributions that I hope someone can clarify:
I pay higher rate tax and I have read that I can make pension contributions which would decrease my taxable income (excluding any interest from savings) to the basic tax rate.
Can this be done via my work pension by increasing monthly contributions, or is it better to pay my personal pension contributions by monthly cheque or lump sum?
Would my PAYE tax be adjusted automatically if I increased my pension contributions to a basic tax rate? Would it be better to provide a self assessment for tax or would a letter to HMRC be better if I made enough pension contributions that decreased my taxable income?
Simple example:
Taxable income is £45000 per annum, with salary sacrifice, 8% pension contributions.
Higher rate tax band (2012/2013): 8105 + 34371 = £42476
Would that mean if I pay £5000 into my personal pension my taxable income would be £40000 and taxed at basic rate?
TIA
I pay higher rate tax and I have read that I can make pension contributions which would decrease my taxable income (excluding any interest from savings) to the basic tax rate.
Can this be done via my work pension by increasing monthly contributions, or is it better to pay my personal pension contributions by monthly cheque or lump sum?
Would my PAYE tax be adjusted automatically if I increased my pension contributions to a basic tax rate? Would it be better to provide a self assessment for tax or would a letter to HMRC be better if I made enough pension contributions that decreased my taxable income?
Simple example:
Taxable income is £45000 per annum, with salary sacrifice, 8% pension contributions.
Higher rate tax band (2012/2013): 8105 + 34371 = £42476
Would that mean if I pay £5000 into my personal pension my taxable income would be £40000 and taxed at basic rate?
TIA