Personal Pension Contribution - Scottish Tax payer - Advice

[Delboypass]

Hi Accountants of CUK,
I have a question on advice and to double check independently my accountant information.
Scottish resident / Tax

Taxable Pay by year end: £125,000
What personal pension contribution would i need to make to bring me back down under the £100k under scottish tax regime?

I thought it would be a simple £25k but accountant is saying something different (£32k personal / £40k with HMRC) so looking for some feedback on what others think to see if matches accountant advice and i make payment.

Accountant has £32k payment needed which is grossed up to £40k by HMRC.

Also noted there would be no tax claim back as part of this £32k which I thought cant be correct?

Any help really appreciated as I really dont understand it all and its a big payment to make.

If needed, can include the accountant workings but really just looking for a quick independent advice saying yes this looks correct or incorrect as previous years has been a much smaller personal pension contribution plus a large higher rate tax payer clawback.

[Protagoras]

What’s your accountant considering that’s not obvious?

I suggest asking your accountant to explain this to you, At the end of the day, it’s your responsibility and so you need to understand it and be able to explain.

Edit.
Paying £32k, +20% tax relief takes this to £40k. But then you also claim £15,625 via your tax return since the payment is out of income in the 45% band.

So where does the £32k figure come from in the first place ... do you have other taxable income apart from salary?

[Delboypass]

This is what the calculation is:
and as part of contribution no clawback expected

Before personal pension contribution:
£146 @ 0% = £0 (reduced personal allowance)
£2,306 @ 19% = £438.14 (starter rate)
£11,685 @ 20% = £2,337 (basic rate)
£17,101 @ 21% = £3,591.21 (intermediate rate)
£31,338 @ 42% = £13,161.96 (higher rate)
£62,272 @ 45 % = £28,022.40 (advanced rate)
Total liability = £47,550.71
(-) Tax deducted at source = £32,000
Total tax to pay = £15,550.71

The way that pension contributions work is that they effectively extend the basic rate tax band, so based on the figures above, I have calculated that the amount would need to contribute to the pension scheme in order to clear this liability in full would be £32,000. If this contribution was made and included in the above tax return, the new calculation would then look as follows:

After personal pension contribution
£12,570 @ 0% = £0 (personal allowance)
£2,306 @ 19% = £438.14 (starter rate)
£51,685 @ 20% = £10,337 (basic rate)
£17,101 @ 21% = £3,591.21(intermediate rate)
£31,338 @ 42% = £13,161.96 (higher rate)
£9,848 @ 45% = £4,431.60 (advanced rate)
Total liability = £31,959.91
(-) Tax deducted at source = £32,000
Total overpaid = £40.09

[Protagoras]

Looking again at the calculation, I think that there are two givens

1. Gross Salary is £124,848
2. £32,000 PAYE tax has been deducted at source

I reckon that the calculations address the question - ‘find the amount of pension contribution from net pay that gives rise to no further PAYE tax liability” and thus is rather different to the question about taking salary under £100k.

The first calculation shows “£11,685 @ 20% = £2,337 (basic rate)” and the second shows “£51,685 @ 20% = £10,337 (basic rate)”. The difference is the £40k (gross) / £32k (net) pension contribution.

This would appear to be consistent with the statement that “The way that pension contributions work is that they effectively extend the basic rate tax band ...”

At the end of the day, you need to convince yourself about this – or have your accountant convince you!

It’s perhaps a curious coincidence that the pension contribution calculated happens to match the PAYE tax deducted at source!

The method appears to be consistent and aligns with information available online, but I’m an engineer not an accountant.

PS – This might help https://www.mandg.com/wealth/adviser...member-pension bearing in mind the disclaimer that the site is “For UK financial advice professionals only.”