Effective income tax rate at 60%?

Dazed_and_confused

I don't think you can claim any (extra) tax relief for salary sacrifice, you have already received the maximum benefit possible by the reducing your taxable salary through the sacrifice.

There is more info here,

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

the_learner

I see. Actually it seems that my company has reduced my taxable income (as reported in my P60) by the amount of my pension contribution last year. So for each £1,000 contributed that actually costed me £600.
But in a salary sacrifice scheme, do we still have the rule that your contribition effectively extend the upper bound of the 20% tax bracket?

NordicNoir

the_learner wrote: »

I see. Actually it seems that my company has reduced my taxable income (as reported in my P60) by the amount of my pension contribution last year. So for each £1,000 contributed that actually costed me £600.
But in a salary sacrifice scheme, do we still have the rule that your contribition effectively extend the upper bound of the 20% tax bracket?

For each £1000 it cost you £580, you saved 40% tax and 2% national insurance.

Under salary sacrifice, both the employee and employer contributions are technically considered employer contributions. You have given up the right to some salary and your employer has agreed to hand it over to your pension provider. Your P60 figures are all after the pension has been sacrificed, so you have never paid any tax on the contribution, so you do not have to do anything else, there is no tax relief to claim.

The extension of the basic band only happens on pensions where the pension company reclaim the basic 20% tax relief and the employee then claims any extra tax from HMRC themselves. This is known as the 'relief at source' method.