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I am UK based and I had got a good bonus in April 2021 which tipped me over 100k, for example, let's say that's an annual incoming of 125k between April 2021 and April 2022 including the good bonus.

HMRC had adjusted my tax code starting August 2021 and each month, I have got extra tax £700-£800ish deducted but I didn't understand why back then.

Only recently I have figured out that's because my personal allowance goes down by £1 for every £2 above the income limit of £100k. And because of that, I have lost £12k of my personal allowance.

If I didn't contribute to any pension during this period, before the end of this fiscal year (e.g. 05/04/2022).

The company I work for won't allow me to do Salary Sacrifice at this stage until the window opens for the next financial year in April.

I understand from my previous question that I can claim those tax back by pension contributions via SIPP.

And I have been trying to understand the calculation here, so please help me check if my understanding below is correct:

Let's say I ended with £127k annual with a very good bonus, but without any pension contribution this year, the extra 27k on top of the 100k got 60% tax bcos of the loss of all my personal allowance of £12,570 so I am paying:


1>40%*12570 = £5028 
2>40% * 27k = £10800

So overall I paid £15828 tax for my earnings between 100k-127k?

And in order to get those tax back including those bcos of lose of my personal allowance.

could you help me point out how much I need to deposit into SIPP ?

1>let's say I deposit £21k after-tax saving trying to solve this, SIPP would top-up 25%, that's 5250 which makes the SIPP pod of £26250?

2>I am then also entitled to get a refund from HMRC of a further how much ? I don't know how to calculate that but is it something like ?


 £15828 - £5250 = £10578?

I am fairly new to this and could really use this community's help , thanks in advance. Any input would be appreciated.

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  • What's the current tax code on your payslips? Feb 28 at 18:16
  • Part of your question talks about paying into SIPP – you should also check out this answer: money.stackexchange.com/questions/109341/… (When is paying into a pension bad tax planning?) Also if you are interested in investing with tax relief and should SIPP not be appropriate, there is 30% tax relief available on VCT investments, and up to 50% for much higher risk schemes like SEIS Mar 1 at 11:33
  • @GS-ApologisetoMonica my current tax is code is K135X but its based on an estimate how much I may earn and doesn't mean much in this context AFAIK.
    – RoundPi
    Mar 1 at 17:10
  • Thanks @marktristan I will have a look !
    – RoundPi
    Mar 1 at 17:13
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    @RoundPI agreed it's based on an estimate, but it might give some indication of other factors that will affect your final tax bill. A more precise question: what other things do you have affecting your taxable income, like benefits, other income (interest/dividends), and tax-deductible expenses like gift aid? Mar 1 at 18:08

1 Answer 1

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To get this exactly right, you need to project your full taxable income at the end of the tax year - i.e. what you'll have to put on your self-assessment tax return. You'll definitely have to fill one in even if you haven't before, as you earn over £100K.

Your taxable income is your salary, plus any other taxable income you have, minus any deductions you can make.

Some common examples of other taxable income:

Some common examples of deductions:

For calculating taxable income you need to be careful to look at the gross figures for all of these. For example for charity donations and pension contributions, they are typically made net of basic rate tax, so you have to add 25% to get the gross figure.

You should be able to project the salary element through to the end of the tax year by looking at your payslips. They'll have a "cumulative taxable income" field. By looking at a normal month where you didn't get any extra money, and comparing to the previous month, you can hopefully work out how much it increases each month and hence what to expect to end up with in your final payslip in March, assuming you are paid monthly.

Once you do have the total figure without any personal pension contributions, you can work out what pension contribution to make. You want a gross figure of (taxable income - £100K).

If you don't want to, or can't, work this out exactly, you can also approximate. If you overshoot (contribute more) then you'll "only" get the 40% tax relief on the excess. If you undershoot, you'll end up paying the effective 60% tax rate on some money.

Note that if you end up wanting to contribute >£40K then you need to start worrying about the annual allowance which adds further complications, but from your question it probably isn't relevant.

Let's say that the contribution turns out to be £27K as would make sense given the income figures in your question (though you've since mentioned P11D benefits so you might need to go a bit higher.)

The actual contribution you should make to a SIPP is net of basic rate tax, so should be 80% of this number, i.e. £21,600. They will claim the other 20% to make it up to the £27K.

You won't get the rest of the tax back immediately through PAYE because your tax code is already setup to deduct as if you lose the personal allowance and even if you tried HMRC wouldn't change it in time.

You'll be able to get it back when you fill in your self assessment tax return. In theory you can do that immediately after the end of the tax year but you might need to wait for your P11D and perhaps a P60 before you know all the right figures to put in it.

Once you fill in your tax return, then compared to what you would have paid/got refunded otherwise, you should get back the other 20% tax on the whole £27K (40% higher rate - 20% basic rate), as well as the whole 40% tax on your personal allowance of £12,570. So that adds up to £5,400 + £5,028.00 = £10,428.00, in addition to the £5,400 that went straight into your pension.

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  • thanks for your very informative answer @GS-ApologisetoMonica ! To answer some of your questions above, 1>yes my overall income should be around £127k. 2>On the P11d I can see an entry under Private medical treatment or insurance around £1.2k. does this affect my tax too ? I have heard it may affect my personal allowance? your answer really helps me , but would appreciate if you could help shed a bit more light on how can I claim the extra £10.428 back from HMRC, would I get cash after a personal tax return ? or do I need to inform my employer who then talks to HMRC ?
    – RoundPi
    Mar 2 at 17:39
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    Yes, the P11D lists benefits that will be counted as taxable income, so you should add that item to the total. (Any P11D you already have will be for last tax year, not this tax year, but you can probably predict a figure for this year). For the repayment, HMRC will make a bank transfer to you. They will probably write to you to tell you you need to fill in a tax return, but you may also be able to contact them now to get the process started so you're ready on April 6th (or as soon as you have your P11D which might be some weeks later). Mar 2 at 22:14
  • Thanks @GS-ApologisetoMonica. You are absoutely right , I can see my current year personal allownace is minus £1.2k which looks like HMRC has already accounted for my private medical insurance cost into that ! As for claiming the further tax relief from HMRC, per you suggested, I would need to do that as part of a tax return. I am wondering when doing the tax return, is it necessary or possible to submit the SIPP Pension Certificate(e.g. how much in year 21/22, I have added net 21600 for example and gross 27k) from the pension provider ?
    – RoundPi
    Mar 4 at 16:34
  • You don't need to send them any paperwork from the SIPP provider, you just need to put the right numbers on the tax return and then have the paperwork stored just in case HMRC challenge you (very unlikely IMO). Mar 4 at 18:12
  • thanks for the answer GS, you have been a great help !
    – RoundPi
    Apr 1 at 16:18

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