£110k Salary: Optimal Pension Contribution to Avoid 60% Tax
At £110k, you're losing £5,000 of personal allowance. See the exact pension contribution needed to escape the trap.
Understanding This Scenario
At £110,000, you're £10,000 into the tax trap zone. Your personal allowance has been reduced by £5,000 (£1 lost for every £2 over £100k), leaving you with just £7,570 tax-free.
This means you're paying 60% effective tax on that £10,000 excess - losing £6,000 that could have been in your pocket or pension.
Optimization Strategy
Optimal Strategy: £10,000 Pension Contribution
To fully escape the tax trap, you need to reduce your taxable income to £100,000: - Contribute £10,000 via salary sacrifice (or 10% of salary) - This restores your full £12,570 personal allowance - You save approximately £6,000 in tax - Your pension receives the full £10,000
The Math: - Without optimization: ~£69,500 take-home + £0 pension - With optimization: ~£63,500 take-home + £10,000 pension = £73,500 total value
Frequently Asked Questions
How much personal allowance do I lose at £110k?
At £110k, you lose £5,000 of your personal allowance (£10k excess ÷ 2). This leaves you with £7,570 tax-free instead of the full £12,570.
What's the optimal pension contribution at £110k?
To fully avoid the tax trap, contribute at least £10,000 to your pension (reducing taxable income to £100k). This can save you approximately £6,000 in tax while building your retirement pot.
Is salary sacrifice better than personal pension contributions?
For high earners in the tax trap, salary sacrifice is usually better. It reduces your taxable income before NI is calculated, saving you an additional 2% compared to personal contributions.