Pension and NI

New_bloke

Hello
I have been told that I may be giving the tax man too much of my money and would like some advice please.
I get an army pension of £500 per month and earn £25000 a year.
I claim my pension tax free and the balance of my tax code goes against my salary.
I am led to believe this is not as tax efficient with regards to national insurance as having all my tax free allowance set against my salary and having my pension tax code set as BR.
Any advice would be appreciated.

chrisbur

National insurance is not affected by your tax code, I would assume nil on pension and paying on salary.. Whatever NI you pay will be exactly the same whatever you do with your tax code.

You do need to check that the part of your tax code set against your pension is being fully used each year or you might have to claim a small rebate after tax year end.

jem16

New_bloke wrote: »

I am led to believe this is not as tax efficient with regards to national insurance as having all my tax free allowance set against my salary and having my pension tax code set as BR.
Any advice would be appreciated.

NI is paid on gross salary so it doesn't matter where your tax free allowance is. No NI is paid on pensions.

molerat

Personally I would have BR against the Xafinity payment and the whole tax allowance against the earned income. It means until you reach 40% tax liability it will look after itself. Nothing to go wrong such as HMRC deciding to change the allowance ratio resulting in under / overpayments, the tax man makes assumptions when codes are split and often gets it wrong, been there !