How do I calculate what to put into my pension for tax relief?
(I asked the accountant and the financial advisor this and the FA's number was 5 times higher so I think one of them misunderstood the question.
When I Google it or search on reddit I keep getting the maximum amount I can contribute at my age, that is not what I want. )
I want to know, considering my low earnings, how much do I put in before I stop getting tax relief on it. I know what the tax relief is in theory but that doesn't count if you're not making enough money to pay that much tax.
What's the formula for that?
No genAI answers please but thank you!
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Edit: I don't have maths so I' m probably missing something that seems really obvious:
I know what the tax bands are, I'm asking a different question. For example, if I earn so little that I only pay 100 euro a year in tax, paying the maximum possible into my pension is going to mean I'm not getting much of a tax refund, right? I don't mean in terms of how high the number is I mean can I get the same refund by contributing less? I.e. is most of what I pay is over what would benefit me tax wise, if I pay the max contribution
Or are you saying the maximum possible becomes 100 euro? And no formula is necessary?
Edit: Devrol understood and answered the question:
"Look at your PAYE figure. Divide that by 20%. That's your number. Express it as a percentage of your gross and make sure it's less than 15%"
Edit: individual Ad also has a helpful answer:
You can calculate it yourself, although up to 44k income tax is 20% we know that a single person with full tax credit won't pay any income tax up to 20k salary, so if you earn 20k the answer is 0. If you earn 23k and you are under 30 you can officially put 3,450e but you already know you only pay tax in 3k, so if you are worried about tax only your limit is 3k. You can ask IA to try to create a formula for you if that is what you are looking for, it depend on the tax credits you have available
Upvote them please 💙
So final answer:
Everything over 20k is taxable
Total income minus 20k is what you're taxable on (unless you're making over 40k and I'm not). Let's call this a
x% of the total is the max contribution, let's call that y (x=the percentage set by the government for your age), but you likely won't be contributing that because you're not getting taxed on your total
So your contribution is less than or equal to y. This is the redundant figure that keeps getting upvoted in the comments while the helpful answers get dow voted.
So, as a person with no employer matching, your contribution should be a as long as a is less than or equal to y.
Am I right?