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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5028
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Is there any way I can reduce the earnings by paying extra

Resolved Question:

Is there any way I can reduce the earnings by paying extra into a personal pension before the end of March to bring the overall earnings below the £150,000 threshold to avoid the 45% tax. With my March salary i will have earned £152,919. Otherwise I will have to pay the additional 5% tax on my entire yearly earnings via my self-assessment tax return. Is it as simple as paying £2919 into a pension before the end of the tax year, meaning my earnings are only 150K at 40% instead of just over 150K at 45% ?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

You pension contributions would attract tax relief at marginal rate..i.e your highest rate of tax.

You would reduce your taxable income to below £150k threshold if you were to make a contribution of £3k into a pension fund before 5 Apr 2014.

You pay Income Tax on your earnings before any pension contribution, but the pension provider claims tax back from the government at the basic rate of 20 per cent. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you pay tax at higher rate, you can claim the difference through your tax return or by telephoning or writing to HMRC. If you're an additional rate taxpayer you'll have to claim the difference through your tax return.

I hope this is helpful.
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Customer: replied 3 years ago.

thanks, XXXXX XXXXX be safe I pay £3K into my private pension, rather than the exact £2919 ? and then will bring my earnings down below 150K ? thanks

Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.