40% tax avoidance through pension contribution

40% tax avoidance through pension contribution

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Hi,

Simple question:

I earn £52k per year and I want to contribute into a SIPP. I want to do this so that I can claim back all of the tax that falls into the 40% bracket on the end of year tax return.

Assume no other income or allowances, how much should I pay into my SIPP?

Replies (13)

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By chicken farmer
06th May 2014 08:43

Simple answer

Learn to perform simple tax calcuations and work it out for yourself

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By The Innkeeper
06th May 2014 08:52

or

employ an accountant

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Replying to Pailing83:
By JCresswellTax
06th May 2014 14:03

A bit harsh

The Innkeeper wrote:

employ an accountant

Would you take on a client who only wanted to know the answer to this question?

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By johngroganjga
06th May 2014 09:00

Look up the personal allowance and the basic rate band.  Add those two figures together.  The result of that calculation is the amount your gross income must not exceed if you do not want to pay tax at 40% on any of your income. 

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By Marion Hayes
06th May 2014 09:10

Not simple at all

John is right - but why would you say assume no allowances? Income of £52k isn't high enough to lose them.

Plus you have annual limits on premiums, with extras brought forward, employee / employer premiums as different rules apply, salary sacrifice etc etc

I would have thought your first steps should be to talk to an IFA to see what the new rules would mean for you and what kind of policy best suits your circumstances before talking about how much could be put in.

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By johngroganjga
06th May 2014 09:23

I read "other" as applying to

I read "other" as applying to both "income" and "allowances".

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By JoeOBrien1983
06th May 2014 09:41

If you earn £52k

And all you want to do is claim back the 40%, the payment would be;

Personal Allowance = £10,000

Basic Rate Tax - £31,865

£41,865

£52,000 - £41,865 = £10,135

Payment of £8,108 to SIPP. They add on 20% tax to gross up, you claim the additional 20% tax (£2,027) through your tax return.

 

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By The Innkeeper
06th May 2014 14:17

out of little acorns

do mighty oaks grow. So probably for a reasonable fee. I don't think I am being harsh - we have all spent years studying and learning our chosen profession - why should we give away our hard earned intellectual property for free

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By JCresswellTax
06th May 2014 14:22

How much would you charge

To perform the calculation Joe has done above?

Don't get me wrong, I am with you generally on your outlook but I think some advice on something as quick and simple as this could be give without too many problems.

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Replying to kharalanova:
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By JoeOBrien1983
06th May 2014 16:51

I agree

JCresswellTax wrote:

To perform the calculation Joe has done above?

Don't get me wrong, I am with you generally on your outlook but I think some advice on something as quick and simple as this could be give without too many problems.

 

I agree, hence my response. This generally is a helpful community here though.

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By The Innkeeper
06th May 2014 14:30

@JCresswell Tax


The major issue I have is that in my experience such so called 'simple' questions are not. A little bit of digging usually throws up something more complex than the Op, in this case, would ever envisage.

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By Sheepy306
06th May 2014 14:30

Agree with JC, members on here kindly give help and advice but on the face of it this seems like a pretty simple question, so why kick up a fuss.

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By chrissio
12th May 2014 09:40

Many thanks

Hi guys,

Many thanks for all your responses. I only wanted a quick and simple calculation doing to get a ball park figure. Many thanks for providing that.

To all the nay sayers above: Not a difficult calculation in 'ideal' circumstances. As we all know real life if much more complicated than the theory and I will get a qualified accountant to do this for me and happily pay the appropriate fee. Rest assured, you have not destroyed your profession by providing a simple calculation on a forum.

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