Quick sanity check on AVCs

[DrFfybes]

MrsF works part time, and her personal allowance is used on this, and draws a DB pension on which she pays 20% tax.

Her salary is increasing a bit, as will the pension, which probably tips her into 40% tax bracket next year with dividends, interest, etc so back to filling in Self Assessment. The personal allowance is used up on her salary, and she still pays NI. She pays into a pension, and also a Salary Sacrifice AVC.

I was idly musing this morning upping the SSAVCs to keep her total income under £50k (and thus claiming marraige alowance) and it struck me..

The SSAVC 'saves' 20% tax, and about 13% in NI, so it costs her £67 for every £100 in her pension. Normally if a higher rate taxpayer does this, they save 40% in tax but the NI drops massively at about the same salary level, so £100 in the pension costs £57 from the pocket..

However if MrsF goes into the higher tax bracket because of her pension, on which no NI is paid, then with the SSAVC then she gets the also avoids paying 40% tax on a slice of her income when she does her Tax Return, so it efffectivelty costs her £47 for every £100 that goes in.

Then when she stops work and is solely on her pension, she can take out £25 tax free, and £60 of the rest after tax(up to the tax limit), and turns £47 into £85.

Surely I'm missing something here??

Paul