Income Tax

Grovester_2

Hi all,

Question about income tax.

For example 50k per year with a tax code of 204L and 6% pension.

On MSE income tax calculated I get a different figure to that on listentotaxman.com

Trouble i have is my salary matches listentotaxman, but the other halfs does not, and it matches MSE.

How much tax should be paid in the example above?

As far as i can tell the difference in tax is the pension as when i put it to zero it matches, and, 40% of the pension (£3000) is £1200. So why does lttm think tax should be reduced by £100 a month?

Thanks.

trevormax

I make out as follows:

£50,000 gross wages less 6% (£3,000) for pension brings gross wages down to £47,000.

£47,000 less tax code 2049 = £44,951 taxable income.

£37,400 taxed @ BR 20% = £7,480
£7,551 taxed @ HR 40% = £3,020

Total tax = £10,500

With NI i'm not 100% sure if the pension contributions are deducted before applying NI. The following calculations are assuming that it does take pension contributions off. Also, the NI calculations are assuming your wages are spread out throughout the tax year and not paid in one or more large lump sums.

Weekly income = £47,000 / 52 = £903
Less NI allowance of £110 per week = £793

First £770 @ 11% = 84.7
Remaining £23 @ 1% = 0.23

Weekly NI = £84.93
Annual NI = £84.93 x 52 = £4,416.36

Total deductions = tax £10,500 + NI £4,413.36 = £14,916.36

Grovester_2

OK, so, £10500 is correct. The tax being paid is £975 pcm, which is £11,700 per year. Does this need to be claimed back via self assesment or have payroll got it wrong?

Not my salary by the way!!!

Grovester_2

The problem is as Trevor has kindly shown that the taxable salary is 44951, but the payslip is working it out as 47951, i.e tax is being paid at 40% on the £3000 pension contributions.

noh

Is the pension a money purchase scheme or final salary scheme?

Grovester_2

Quick check shows that ...

However, some employers use the same method of paying pension contributions that personal pension scheme payers use - read more in the section on 'Personal pensions'.

So need to check what pension scheme the company is running.

Also I know the 'employee' has never done a tax return so i'm guessing they've missed out on a load of tax refief by paying 40% tax on pension contributions for years!!!

Thanks for the help

Grovester_2

noh wrote: »

Is the pension a money purchase scheme or final salary scheme?

no idea sorry. Was just asked to look in to it for a friend. i will get the pension details.

Grovester_2

Found out, tax return required.

Basically pension is taxed, the pension co. reclaim 20?% tax and the other 20% needs to be done via a tax return.

Grovester_2

Don't suppose anyone knows the form for getting back previous years tax on pension payments?

jem16

Phone up HMRC and tell them that you wish to claim back tax relief on pension contributions over the last 6 years.