Tax and Pensions


M

Mick

I am currently employed as a locum (PAYE). If I can stay in employment until
the end of the financial year I am likely to have earned more than the Basic
Rate personal allowance. If for example I earn 3K above BR, would paying
3.5K into a personal pension avoid me becoming a higher rate tax payer?
 
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T

Terry Harper

Mick said:
I am currently employed as a locum (PAYE). If I can stay in employment until
the end of the financial year I am likely to have earned more than the Basic
Rate personal allowance. If for example I earn 3K above BR, would paying
3.5K into a personal pension avoid me becoming a higher rate tax payer?
Yes, but you can also decide after the end of the year how much you wish to
contribute for the year in question. Don't ignore benefits in kind, if you
get any. The IR would give you a refund after you do a self-assessment on
any tax overpaid.
 
J

Jonathan Bryce

Mick said:
I am currently employed as a locum (PAYE). If I can stay in employment
until the end of the financial year I am likely to have earned more than
the Basic
Rate personal allowance. If for example I earn 3K above BR, would paying
3.5K into a personal pension avoid me becoming a higher rate tax payer?
Yes, but don't pay into a pension purely for tax reasons.
 
M

Mick

Yes, but you can also decide after the end of the year how much you wish
to
contribute for the year in question. Don't ignore benefits in kind, if you
get any. The IR would give you a refund after you do a self-assessment on
any tax overpaid.
Thanks for your reply Terry. I'm not clear on what you mean by
self-assessment as I'm PAYE. Is this similar to applying for a Tax rebate?
I noticed on your website that you used to work for Turner Bros. Isn't this
the company that is having difficulties with its pension scheme? I feel
sorry for those affected, hope you are not one of them.
 
M

Mick

Yes, but don't pay into a pension purely for tax reasons.
Thanks for your reply Jonathon. It is not only for tax reasons. I am 44
and I have one company pension that was frozen (until I'm 60) after 15 years
employment when I was made redundant eleven years ago. Apart from that I
have a couple of very small pensions (and I mean small) therefore my
thinking was to put as much as can away for my retirement whilst saving a
bit of tax in the process if this makes sense.

BTW I have also paid full stamp (for 28 yrs) since I started work at 16
years old. However, from what I can gather the State pension is unlikely to
be worth much by the time I receive it. I have also seen reports that the
government would like us to work until 70 before getting our state
pensions!!
 
J

john boyle

Mick said:
Thanks for your reply Jonathon. It is not only for tax reasons. I am 44
and I have one company pension that was frozen (until I'm 60) after 15 years
employment when I was made redundant eleven years ago. Apart from that I
have a couple of very small pensions (and I mean small) therefore my
thinking was to put as much as can away for my retirement whilst saving a
bit of tax in the process if this makes sense.

You are confusing 'pensions' (which, in my view are all useless) with
'post retirement financial planning'. The two are NOT synonymous.
BTW I have also paid full stamp (for 28 yrs) since I started work at 16
years old. However, from what I can gather the State pension is unlikely to
be worth much by the time I receive it. I have also seen reports that the
government would like us to work until 70 before getting our state
pensions!!
DONT put another bean into a formal pension. Look at investing in Unit
Trust and equities and cash etc., or whatever you would have had in your
chosen pension but use other wrappers such as ISAs or invest directly.
No tax relief on the way in, admittedly, but FAR more tax friendly on
the way out and a far better range of funds to choose from.

Buy the contents of a wrapper, not the wrapper itself.
 
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T

Terry Harper

Mick said:
Thanks for your reply Terry. I'm not clear on what you mean by
self-assessment as I'm PAYE. Is this similar to applying for a Tax rebate?
I noticed on your website that you used to work for Turner Bros. Isn't this
the company that is having difficulties with its pension scheme? I feel
sorry for those affected, hope you are not one of them.
In general, if you have any income apart from that on which PAYE is levied,
or pay into a personal pension scheme, or have other things which the tax
man needs to or ought to know, then you are likely to fill in a
self-assessment form after the end of the tax year. Asking for a tax refund
is different, but may end up with the same result.

Fortunately I withdrew my pension contributions when I left in 1968. Had I
left them, I would have been drawing the pension, small as it would have
been, for almost 10 years now:)
 
T

Timothy Lee

john boyle said:
You are confusing 'pensions' (which, in my view are all useless) with
'post retirement financial planning'. The two are NOT synonymous.
I wouldn't say all, at least not for the higher rate tax payer I think
there is still a part to be played by the immediate vesting pension to
provide some income in that situation.
 
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J

john boyle

Timothy Lee said:
I wouldn't say all, at least not for the higher rate tax payer I think
there is still a part to be played by the immediate vesting pension to
provide some income in that situation.
You are right, "all" is the wrong word. Most occupational defined
benefit schemes are OK. and as you say, Immediate vesting is OK as well,
(in the right circs)
 

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