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Pension Taper Calculation

Practical Issues
deltrotter
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Pension Taper Calculation

#401044

Postby deltrotter » April 2nd, 2021, 10:56 am

Hi everyone

Seeking help trying to calculate the amount

Pension taper kicks in at £240k.

Can someone confirm if I am getting the calculation right - particularly with regards the Personal SIPP Contribution and whether I need to add on the £3k the govermnent adds to this contribution)?

Example figures.

Salary : £220k
Employer Pension Contribution : £22k
Personal SIPP Contribution (£1k per month) : £12k
Dividend Income : £1k
Interest Income : £0.1k

Total : £255.1k so taper will come into effect.

TIA

Del

Kantwebefriends
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Re: Pension Taper Calculation

#401273

Postby Kantwebefriends » April 2nd, 2021, 11:07 pm

You need to distinguish your threshold income from your adjusted income.

You might find this helpful
https://adviser.royallondon.com/technic ... h-incomes/

Or this
https://www.pruadviser.co.uk/knowledge- ... allowance/

Although it applied when the numbers were different I found this useful when a nephew sought my wisdom. It might pay to start with this and then meet the updated numbers in the two links above.

https://3652daysblog.wordpress.com/2018 ... nce-taper/

bluedonkey
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Re: Pension Taper Calculation

#401348

Postby bluedonkey » April 3rd, 2021, 11:44 am

Yes, the SIPP contribution is the amount gross of basic rate tax, so £15k in your example.

deltrotter
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Re: Pension Taper Calculation

#401356

Postby deltrotter » April 3rd, 2021, 12:38 pm

Thanks guys - so let me 'spli't these into the threshold and adjusted income and try again - it may help others searching for this. Can you have a look and see if I have it right.

Threshold Income

Salary : £220k
Dividend Income : £1k
Interest Income : £0.1k

Income = £221.1k

MINUS

Personal SIPP Contribution (£1k per month) : £12k = £15k Gross

Total : £206.1k so taper will come into effect.


Adjusted Income

Salary : £220k
Dividend Income : £1k
Interest Income : £0.1k

PLUS

Employer Pension Contribution : £22k

Total : £243.1k so taper will come into effect.

Taper = Amount over £240k / 2 = £3.1k / 2 = £1.55k

Maximum Pension Contribution = £40k - £1.55k = £38.45k


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