If a non earner is contributing £2,880 net per year to a pension and they already have the new state pension of £9,338 pa in payment from 6 April 2021 but no other taxable income. The year earning April 2025 and April 2026 they will be paying income tax of £8 and £48 respectively.
Therefore, still worth doing to get the £900 PA tax free sum.
If they already have say £1,500 a year or so income from a small occupational pension, for working 10 years part time as a low paid admin person before retirement which is not untypical. The tax take in 2022 is £194 raising to £373 in 2026 off their £900 tax free sum. A bit of a hit.
Increase that same possible occupational pension to £2,500 a year and the average tax take from the £2,880 contribution £2,700 payment if you take that out, after inflation on the state pension and possible occupational pension on average in those years is around £490 a year, over half the tax free sum.
Just something to think about.
For those on a basic state pension from before April 2016 and no other taxable income, it is still a good deal.
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Flat Personal Allownces till 2026 plus £2880 PA Contributions
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Re: Flat Personal Allownces till 2026 plus £2880 PA Contributions
mearnsfool wrote:If a non earner is contributing £2,880 net per year to a pension and they already have the new state pension of £9,338 pa in payment from 6 April 2021 but no other taxable income. The year earning April 2025 and April 2026 they will be paying income tax of £8 and £48 respectively.
Not sure I follow that. The state pension is their only taxable income, and that still won't be anywhere near the £12,570 personal allowance then. I can't see the relevance of the £2880 contribution.
Scott.
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Re: Flat Personal Allownces till 2026 plus £2880 PA Contributions
Yes,
As clear as mud Scott you are correct!
I should have said if they have the new flat rate state pension in payment plus only the £2,700 taxable income from a net £2,880 pension contribution. The tax take for 2025 and 2026 off their £2,880 contribution would be £8 and £48 repectively. Which make a small hit on the £900 tax fee payment that the contributions attracts. This is the result of the flat personal allowance until April 2026 advised by the Chancellor today.
As clear as mud Scott you are correct!
I should have said if they have the new flat rate state pension in payment plus only the £2,700 taxable income from a net £2,880 pension contribution. The tax take for 2025 and 2026 off their £2,880 contribution would be £8 and £48 repectively. Which make a small hit on the £900 tax fee payment that the contributions attracts. This is the result of the flat personal allowance until April 2026 advised by the Chancellor today.
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