Pension Contribution Question

WagonWheeler

If I was earning 65K and making a pension contribution of 25% (16,250) via my work smart pension, Am I correct in thinking this would take my salary taxable income to 48750? or am I missing anything with how tax works with pensions contributions.

Albermarle

You need to tell us whether the 25% is taken out of your gross pay ( usually nowadays by a salary sacrifice arrangement but not always ) or out of your net pay .

WagonWheeler

Hi Albermarle, Thanks for the response.Yes my company has a salary sacrifice arrangement.

Dazed_and_confused

Salary sacrifice means you don't pay anything into your pension. You agree to give up part of your salary and in return your employer contributes to your pension.

This means no tax relief at source can be allowed in respect of the pension contribution but by agreeing to be paid a lower salary you have less personal tax to pay.

So in your example a salary of £65,000 become taxable salary of £48,750 (the bit that appears on your P60).