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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4952
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I have a tax question. I am earning £60,000 per year and have

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I have a tax question. I am earning £60,000 per year and have a car alloance of £4200. I have to contribute 1% to my pension. However, if there an optimum amount of pension that I sould contribute, so it makes my tax more effective i.e. if I put more into my pension, it will mean my gross salary is lower, and what I get taxed on is lower. Can you please advise the right amount to contribute to my pension to make the tax most efficient. This is a UK question.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The maximum contribution, the aggregate of your own and any made by your employer, may not exceed 40K or 100% of earnings, in the current tax year. This maximum has been successively squeezed by the current Government. If you use a SIPP you can go back three years to mop up any unused contribution levels. 2011 - 2014 the limit was 50K, thereafter 40K. The 100% rule always applies. I do hope that I have shed some light on your pension contribution situation.
Customer: replied 2 years ago.

This has not really answered my question. My question is more around if there is an optimum contribution in order to make my salary lower and make my tax more efficient. Unless your saying, there is no sweet spot, and the more I give to pension, the lower my tax. Can you please clarify?

Yes, the more you pay into a pension fund, subject to the 100% of earnings rule and the 40K maximum in the current tax year, the lower will be your exposure to Income Tax. If you use a SIPP you can go back to mop up unused contribution levels from prior years as I explained in my original answer.
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