Flat Personal Allownces till 2026 plus £2880 PA Contributions

[mearnsfool]

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.

[swill453]

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.

[mearnsfool]

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.