The Lemon Fool

Hopefully, this will only be a little complicated for the current tax year, but I am keen to find the right mix of pension contributions to be as efficient as possible given the circumstances.

In the past, I have been consulting through a limited company, which then made a £40k employer contribution to my SIPP each year.

I am currently working on an inside IR35 contract, and may also move into a permanent role at some point later this year. I expect that my total income (as a PAYE employee) this tax year will more than £100k (through a combination of the day rate I get on my inside IR35 contract which is paid out as a monthly salary, plus the salary for any period I was a permanent employee).

I have already made a £20k contribution from my limited company into my SIPP for the current tax year, but now need to decide how to best use up the remaining £20k allowance.

Am I right in thinking I should not make any more SIPP contributions from the limited company so that I can better manage my PAYE income, i.e. I could divert up to £20k of this directly into my pension and ideally keep my total earnings (after the pension contributions have been made) to less than £100k?

over 100k of taxable income, and your income tax allowance gets withdrawn up to I think 123k.
for this bracket, if you are paying NI as well, then your tax+NI marginal rate is 62%.
Max out your pension contributions to keep yourself below this.
If you are anywhere near being able to withdraw pensions/tax free lump sum, and you are not in a cash flow crunch. then is doesn't make sense to let your earnings rise over this threshold, unless by a major step

Keep a close eye on when you are likely to hit the pension LTA limit of 1023k? adjusted for inflation.

At that point it is really not worth working harder.....
tuk020 (now on 4 days a week)

PS. I know this is not helping to pay for extra NHS etc. but the incentives to work harder are really not there.

Just to update some of those numbers:

The "effectively 60% band" is from £100k to £125K (it's always double the basic rate exemption, so currently 2 x £12,500).

The 60% is 61.5% in Scotland, relevant for some, plus the 2% NI.

The LTA is currently £1,073,100.