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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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I have two sources of income, 1. A pension amounting to

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I have two sources of income, 1. A pension amounting to £22000 a year and 2. My current employment £35244.00 a year giving a total of £57248.00. all the tax loading is against my employment salary and therefore i pay 40% tax on some of this. i would like to increase my pension contributions to take advantage of the Government tax allowance to avoid paying 40% tax on any of it. What % of my employment salary would i need to pay in to my employment pension to achieve this?

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Many thanks

Thank you for your question.

Gross income in excess of £50,000 puts you into 40% tax bracket.

If you were to increase your pension contributions by £8,000 a year this would reduce your taxable income to below £50,000 and you would pay income tax at basic rate of 20%.

Additional £8,000 into a pension fund represents some 23% of your salary of £35,244.

My aim is to give you a professional service. I hope this is helpful and answers your question.

Please remember to rate my service by selecting the 5 stars at the top of the screen before you leave JA today. If you need more assistance, please use the reply box below and let me know. It has been my pleasure to assist you with your question.

Customer: replied 3 days ago.
You have stated that if I reduce my taxable income below £50,000 I would avoid paying 40% tax. I thought the tax threshold was £37,500 and above for paying 40% tax or is it you have allowed for personal allowance and therefore it is £50,000?

Thank you for your reply..

I have given you the gross earnings figure before personal allowances are taken off.

The threshold of £37,500 is taxable income after tax free personal allowance of £12,500.

I hope this is helpful and answers your question.

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