Calculating higher rate tax payer optimum additional pension contributions

zagfles

Right - so he's not being taxed on his car allowance in those payslips.

The thing to look at is the difference between the cumulative taxable pay to date from one payslip to the next, that's 15886.86 - 10591.24 = 5295.62

That equals pay minus tax deductible stuff, childcare sal sac and employee pension: 5675 - 124 - 255.38 = 5295.62

So they do that weird thing in the March payslip you mentioned, as they have to put the car allowance through as taxable pay. Rather than simply grossing it up every payslip which would seem easier.

They might do it like this so they can be sure of the tax rate the employee will be paying, or maybe they adjust for any business mileage?

Of course when companies "gross up" allowances they only account for the tax they see, they don't account for stuff like child benefit reduction, assessments for student finnace, tax credits etc etc. Or if the employee has other income which might put them in a different tax bracket.

So if you look at the March payslip you'll probably see a massive increase in the cumulative taxable from Feb. That'll be reflected in his P60 and will be the taxable pay used for stuff like child ben high income charge etc.