Tapered AA idea

Hi All,

Wanted to run something by the forum and see if it makes sense,.

If we have a member who is in excess of £120,000 earnings and has lost their PA (has some tapering too, but that is separate issue)

Would making a pension contribution in excess of the AA, still save them tax if they regain their personal allowance?

My understanding is you only pay AA excess back at your marginal rate, which is 40%, whereas getting their income to below £100,000 would save them 60%ish on the earnings between 100k-120k

So they could regain their personal allowance, and only pay 40% tax on the excess of the AA... am i missing something or does that make sense?

of course this is provided the member is happy to do the above



  • Why would you need to exceed the AA? If you want to get their income below £100k, by my calculations you wouldn't need to make a £40k contribution to achieve this.

    A pension contribution would increase the level at which they start paying (higher rate) tax, so it appears would regain their PA and therefore save some tax. This would be declared on their self-assessment; I don't see how you would pay tax on the excess if you keep the contribution at or below £40k. Unless of course, he has triggered the MPAA, and that would then be subject to penalties

  • The above should read £130,000 (sorry), plus their employer contribution of £40,000 means they are subject to Tapered AA as adjusted is above £150,000.

    If the member contributed an additional personal £30,000 gross their income would be below £100,000 and they would regain their personal allowance.

    Even though they would exceed AA by £30,000 they would only pay 40% tax on the £30,000 over the annual allowance £16,000

    But they would still have saved money by regaining personal allowance no?

  • JonaJona Member

    You only pay the effective 60% on £23,700 (18/19 TY) - so if £30K paid it would not be the full 20% back....

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