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Basil is employed. During the tax year 2016/17 Basil had taxable income of £160,000 which was all employment income. Basil made contributions of £50,000 (gross) into a personal pension scheme during the tax year 2016/17. This was the first year that he had been a member of a pension scheme. In future, his employer may contribute to Basil’s personal pension scheme.
What is Basil’s annual allowance charge for the tax year 2016/17?
The answer is £6000. They used the figure of £160,000(which is the taxable income after deduction of the personal allowance) as the adjusted income for the calculation of tapered annaul allowance. Shouldn’t we use net income? Shouldn’t we add the personal allowance back?
I just realised my mistake. There was no personal allowance deducted as adjusted net income clearly exceeds £122,000. Without the personal allowance, the taxable income is the same as the net income.