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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I work as a senior lecturer at a university where my gross

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I work as a senior lecturer at a university where my gross pay is £3926 / month. I also receive £680 per month from a pension from a previous employer. I am paying a huge amount of income tax, is there any way I can reduce this?

There are few options open to employees to reduce their tax exposure I'm afraid.

The only way you can reduce your overall tax liability short of investing in high risk companies through tax advantages vehicles such as Enterprise Investment Schemes or Venture Capital Trusts (these are really aimed at those with money they can afford to lose in search of the next Google) is through making pension contributions.

Your gross annual income would appear to be £55,272 (£3,926 x 12 + £680 x 12). That means you are paying tax at 40% on £13,407. A net of basic rate tax relief pension contribution of £10,725.60 would make you a basic rate taxpayer. Whilst the basic rate relief would be claimed by the pension plan provider and added to your pension plan, the additional 20% tax reliief would end up in your bank account.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

I'm sorry to be thick - you can tell I lecture in health - not finance! At the moment I pay 431.89 into my pension each month - what would I have to increase that to to get the tax benefits? And would this be through AVRs?



Is the pension scheme one provided by your employer or a private one which you started yourself? How do you pay the pension contribution of £431.89? Is it deducted from your pay and shown as a deduction on your payslip each month or do you pay it directly from your bank account?
Customer: replied 3 years ago.



It is paid directly from my wages into the teacher's pension. I think I can either pay more through AVCs (Prudential) or directly from the teacher's pensions scheme,


You say you earn £3,926 per month. Is that before or after your personal contribution in to the Teachers' Pension scheme? Is the figure of £431.89 the actual figure that appears on your payslip as a deduction?
Customer: replied 3 years ago.

the 3926 is before any deductions, my pension contributions are £431.89 - deducted at source. I don't do any sort of self assessment tax thing, maybe I should?


Leave this with me while I do some calculations.
Customer: replied 3 years ago.

thanks you,



Your gross income is £55,272. You have a personal allowance of £10,000. If you made no pension contributions whatsoever, you would pay tax at 20% on £31,865 and at 40% on £13,407 in the current tax year.

Assuming the £431.89 per month is gross, you pay pension contributions of £5,183 per annum. That reduces your taxable income to £40,089. So, you pay tax at 20% on £31,865 and at 40% on £8,224. You'd need to pay £6,579.20 net of basic rate tax relief (£8,224 gross) into your AVC to clear your 40% tax liability or discuss your options with the pension scheme managers. The additional 20% tax relief would be claimed though a tax return so you might consider registering for self-assessment.

If you made regular monthly additional pension contributions you could get tax relief through your tax coding for them which may save you having to complete an annual tax return.

As you already receive a pension, this may ultimately have a tax impact on your Teacher's Pension savings when you come to draw your pension so it would be a good idea to talk to the plan managers in any event.
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