Pensions and reduced allowance for high incomes

I hope this group isn't completely dead!

I'm trying to make sense of the calculations for the reduced ('tapered') pension annual allowance.

Hypothetical person gets paid £180K. They also contribute 5K into a pension via salary sacrifice and their employer matches that 5K. (set up before 8th july 2015) They also pay another 8K into a separate pension that then claims the 2K tax relief. (tax relief at source)

They also make a gift aid charitable donation of 8K (and the charity will then claim 2K of tax)

Assume that they have no relief available from previous years.

Work out your net income Add up your taxable income and take off any tax reliefs that apply, like:

payments made gross to your pension scheme(s) (before tax relief) because your pension scheme isn?t set up for automatic relief or someone else pays into your pension trading losses, for example trade loss relief or property loss relief

******** I assume this is 180K - 10K (charity) = 170K ********

Work out your threshold income

1. Start with your net income.
2. Deduct the gross amount of your pension contributions (where tax relief has been given at source).
3. Deduct the amount of any lump sum death benefits you received from registered pension schemes.
4. Add any reduction of employment income for pension provision through salary sacrifice arrangements set up after 8 July 2015.
5. Add any reduction of employment income for pension provision through flexible remuneration arrangements set up after 8 July 2015.

**********

170K - 10K(pension relief at source) = 160K **********

Work out your adjusted income

1. Start with your net income.
2. Add back in pension savings made for you by your employer.
3. Add back in payments made to your pension scheme that got tax relief but were paid before tax relief was given (because your pension scheme wasn?t set up for automatic relief or someone else paid into your pension).
4. Deduct the amount of any lump sum death benefits you received from registered pension schemes.

***********

170K + 5K(salary sacrifice) + 5K(pension match) + 10K(pension relief at source) = 190K

Their reduced annual allowance is now 40K - (190K-150K)/2 = 20K and their total pension contributions are 20K so everything is hunky dory.

Does that all look correct so far?

Now where I start getting confused.

Assume instead of making that 8K payment into their pension (relief at source) they make a 48K payment.

Net income: unchanged: 170K Threshold income 170K-60K = 110K

This puts their threshold income below(on) the 110K threshold and therefore they retain their entire 40K allowance.

They've paid 70K into their pension therefore there will be a tax charge on the 30K excess over the annual allowance.

Does this sound right?

If they had unused allowance from previous years then they could have been using that up and there would then be no tax charge. Is that really the intention - that people with unused annual allowance can potentially get more pension tax relief than those who dont?

(They presumably also could pay 24K into their pension and an extra 24K to charity to achieve the same result of getting the entire 40K pension annual allowance. That feels more reasonable to me)

*********** Reduced allowance for high incomes You?ll have a reduced (?tapered?) annual allowance for the 2016 to 2017 tax year if both the following apply:

your ?threshold income? is over £110,000 - this is your income excluding any pension contributions (unless they?re paid as a salary sacrifice by your employer) your ?adjusted income? is over £150,000 - this is your income added to any pension contributions you or your employer make

**************

It's all so fscking complicated :-(

Tim.