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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I expect (by the time we get to 5 April) my total income

Customer Question

Hi,
I expect (by the time we get to 5 April) my total income for 2015/16 to be £124k on which I'll have paid tax (PAYE) of £40k.
As this obviously takes me beyond the point at which my personal allowance is gone completely, I'l looking at an additional tax charge of around £4k.
However, to avoid this I'm thinking of making a one-off pension contribution and wanted to double check my calculations:
Income - £124,000
Pension Contribution - £19,250 (grossed up to £24,062.50)
Adjusted Net income = £99,937.50
Income Tax calc=
£10600 @ 0% = £0
£31,865 @ 20% = £6373
£57,472.50 @ 40% = £22,989
Total Tax liability = £29,362
And here we get to the question... does that mean I'd be due a tax refund of £10,638 or does this get adjusted by the value of 20% tax 'relief at source' which my SIPP provider will claim on my behalf?
Thanks in advance
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you.
Expert:  TonyTax replied 1 year ago.
As you will read here, your adjusted net income is your income less grossed up pension contributions so you need to get your adjusted net income to £100,000 or less to avoid losing any of your personal allowance:https://www.gov.uk/guidance/adjusted-net-incomeThe SIPP provider will claim back £4,812.50 in basic rate tax relief into your SIPP.As for your tax position, as you have had basic rate tax relief at source, you extend the basic rate tax band of £31,785 by the gross pension contribution to effect the additional tax relief through the self-assessment tax system. If you didn't extend the basic rate tax band, you would get tax relief at 60%.I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thanks, ***** ***** doesn't answer my question... what I wanted to know was whether I'd be able to claim a tax refund of £10,638 or £5,825 (based on the details set out)
Expert:  TonyTax replied 1 year ago.
Can you tell me how much tax you will have paid on your salary by the end of the tax year on 5 April please
Expert:  TonyTax replied 1 year ago.
The total tax relief on a gross contribution of £24,062.50 will be £9,625. Of that, half will go into your SIPP directly from the tax office and the balance of £4,812.50 will be reflected in your self-assessment so if the correct amount of tax had been deducted from your salary, you will be overpaid by £4,812.50.
Customer: replied 1 year ago.
By 5 April I'll have paid £39.983.40 in tax
Expert:  TonyTax replied 1 year ago.
Thanks. According to my calculations, you will be overpaid by £5,792.40 if you make a pension contribution of £19,250 net of basic rate tax relief.
Expert:  TonyTax replied 1 year ago.
Hi.
I'm just following up to find out if my answer helped or if you have any further questions.

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