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AVC's - a simple question

Ok, I have a simple question but I can't seem to find an unambiguous answer anywhere...

Occupational pension scheme Higher rate tax payer

If for example, I earn £32,401 per annum i.e. £1 over the 2005/2006 higher rate tax threshold of £32,400 and I contribute the maximum 15% of my salary, £4860.15, to an AVC, will I receive 40% tax relief on the full amount i.e. will my tax paid to date be £1944.06 less at the end of the financial year.

In other words, even though I would have only paid 40% tax on £1, can I claim £1944.06 in relief, as AVC relief is paid at highest marginal rate.

Also, as this is tied to an occupational pension scheme would this 40% relief be given at source.

Reply to
confused
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I wouldn't have thought so. I'd expect you to get 40% relief on £1 and 22% relief on £4859.

In any case, unless your personal allowance has been used up on other earnings, or through underpaid tax in previous years, you need to earn in excess of £37,295 before you pay any higher rate tax.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

Indeed.

Actually, what happens is that the "taxable salary" shown on the payslips will be "gross salary less OPS conts". So if salary = 40K and OPS conts = 10K by the end of the year, then "taxable salary year-to-date" will be

30K and that is the figure that income tax is based on.

Which means that you get 40% relief on that part of the salary over the HRT threshold, and 22% relief on that part below it.

Reply to
Tim

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