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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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After thirty years I am in receipt of a good public service

Resolved Question:

After thirty years I am in receipt of a good public service pension of around 25K. I have gone back to work for local government and will now also earn nearly the same in wages.
However i am now in the higher tax bracket due to that combined income.
If I now make AVCs to the new local government pension scheme I've just joined, will this bring down below the higher tax threshold? ?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

First point, watch your tax codes like a hawk. With two separate sources of income they will almost certainly be being generated by more that one tax office and there is always a danger of your being allocated a personal allowance by both thus resulting in inadequate PAYE deductions.

Your proposal to make AVCs will reduce your income for tax purposes. However, the limits on pension contributions, are steadily falling and now stand at 40K per annum including employer's contributions. Also watch out that you are not going to breach your lifetime allowance with a pension pot of over one million. If there is any danger of this you may be able to apply for protection under the Individual Protection 2016 and Fixed Protection 2016 schemes for your public service pension scheme.

I do hope that I have been able to shed some light on your situation.

Customer: replied 1 year ago.
Thanks for the prompt answer. How do I work out how much AVC I need to make?
Customer: replied 1 year ago.
Is it simply the difference between the higher tax threshold amount (40 and half K ??) and my current combined pension and wage income?
Expert:  bigduckontax replied 1 year ago.

Well, let us assume that you are not going to breach the lifetime allowance limit.

Take 40K, deduct your employer's contribution to the pension scheme if any. The balance can then be contributed net to the scheme who will recover the tax direct from HMRC. Of course you can always pay less that that. You should also make sure that your AVCs will not breach the lifetime allowance. I regret the computation becomes increasingly complex as time goes by; blame the Chancellor!

Please be so kind as to rate me before you leave the Just Answer site.

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Customer: replied 1 year ago.
That's super. Answers my question perfectly (and incidentally way more so than the one word negatives when ringing HMRC) so thanks very much. Will rate accordingly. Have a good weekend!
Expert:  bigduckontax replied 1 year ago.

Delighted to have been of assistance.

Thank you for your excellent support.