tax and pension contributions

Starside

hello, this might be a silly question. I always thought that pension contributions (when deducted from my pay by my employer) were tax free. Is this correct?

I recently received a Tax calculation from HMRC and it does not take into account any pension contribution. Therefore I am taxed on my 'Gross - tax code', instead of 'Gross-tax code-pension contribution'.

Do I understand this correctly?

E.g. if I earn £1000 per month and £100 is taken out of Gross pay towards my pension, then do I only pay tax on £900 (ignoring tax codes)

Thanks
Paul

BoGoF

You are correct, does your P60 reflect the correct figures, i.e. after deduction of pension?

jem16

Starside wrote: »

hello, this might be a silly question. I always thought that pension contributions (when deducted from my pay by my employer) were tax free. Is this correct?

Some company pension contributions are taken from net pay as opposed to gross pay.

What kind of company pension do you have?

Does your P60 show your taxable pay the same as your gross pay or does it show your gross pay minus your pension contributions?

MPH80

Indeed Jem16 is correct - some (if not most in my experience?) private company pensions are paid from your net earnings, and then the 20% from your contribution is added back by the pension company.

E.g. I want to contribute £100 a month to my pension - so my employer deducts £80 from my payslip after tax and sends it to the pension company where they add back on the remaining £20 (which they claim from the government) to make it up to £100.

On the other hand - my wife's company had a very complicated pre-tax arrangement, but the effect is that her gross, taxable, pay is lower by the amount she contributes to her pension - so even then - HRMC don't care about it on her tax code.

M.

Starside

thanks for confirming my understanding. My P60 makes no mention of pension contributions, it just lists the pay for the year and the tax paid. I assume that the tax office has just taken into account my pension.

(yes my pension is taken pre tax as part of a final salary scheme)

thanks
Paul

jem16

Starside wrote: »

thanks for confirming my understanding. My P60 makes no mention of pension contributions, it just lists the pay for the year and the tax paid. I assume that the tax office has just taken into account my pension.

(yes my pension is taken pre tax as part of a final salary scheme)

thanks
Paul

My P60 makes no mention of my final salary contributions either. However my taxable pay, which is what is marked on my P60, is lower than my actual gross pay by the amount of pension contributions.

Yours should be the same.

BoGoF

Starside wrote: »

thanks for confirming my understanding. My P60 makes no mention of pension contributions, it just lists the pay for the year and the tax paid. I assume that the tax office has just taken into account my pension.

(yes my pension is taken pre tax as part of a final salary scheme)

thanks
Paul

I didn't mean did the P60 show the pension contributions - it won't. As jem16 has said your P60 should show the taxable pay to date from your final 2010-11 payslip - not the gross pay. HMRC will have got their information from your employer's end of year return. It is not unheard of for the employer to report the gross figure not the taxable figure.