Take home pay query…

Cypruseast

Hi folks. I made a change at the end of last month to increase my pension contributions and had done a number of checks online to see what my likely take home pay would be and what actually occurred on pay day was quite different. 

Below is the scenario.

Gross Pay - £5192
Childcare Vouchers (Sal sac) - £243
Total Gross for tax - £4949
Pension (inc AVC) £1100

I also have annual benefits in terms of a company car and medical benefits cash equivalent of car is approx. £6236 and the medical benefit cash equivalent is £723. 

I increased my pension contributions from £500 (inc. AVC) per month to the £1100 as stated above. Furlough pay in the previous 6 months or so has confused things a little, but I didn’t see as big a reduction in the tax paid as I was expecting given the significant increase I made in my pension contribution.

https://www.thesalarycalculator.co.uk/salary.php 

I used the above link pre and post making the change and it gives quite a different take home pay figure than what actually occurred.

The reason I made a change to my pension contributions was of course to increase that monthly investment but also to take myself below the higher rate tax band in order to maintain child benefits. 

I have a couple of questions:

1. Are my calculations accurate on reducing my gross for tax below £50k (gross salary is £62.8k per annum) to take me below the threshold below £50k. For that to be accurate I’ve assumed below:

Gross Salary - £62.3k
Other benefits - £6,959k
Total = £69,263

LESS

Childcare Vouchers (Salary Sac) £2,916
Pension £1,100/month x 1.25 x 12 = £16,500
Total = £19,416

£69,263 - £19,416 = £49,847

Have I missed anything here??

2. Based on all of the figures above can anyone help me calculate what my take home pay should have been last month as what I worked it out to be was quite different to the reality. 

Thanks in advance….

Dazed_and_C0nfused

I increased my pension contributions from £500 (inc. AVC) per month to the £1100 as stated above. 

Bit tricky as you haven't told us the contribution method you use for the AVC.

Net pay?

Relief at source?

Or salary sacrifice (but that would be odd).

Cypruseast

Dazed_and_C0nfused said:

I increased my pension contributions from £500 (inc. AVC) per month to the £1100 as stated above. 

Bit tricky as you haven't told us the contribution method you use for the AVC.

Net pay?

Relief at source?

Or salary sacrifice (but that would be odd).

I believe that it is relief at source i.e. to date £500 was taken from my net pay (after tax and NI) and the pension company added the basic rate tax relief giving you £625 in my pension fund every month. 

Dazed_and_C0nfused

Relief at source would have no impact on your pay apart from the (net) contribution being taken from your net pay after tax and NI have been deducted.

I suspect you are under a few misapprehensions about relief at source contributions.

Firstly they do not reduce your taxable income.

They do reduce your adjusted net income, which is used to calculate the High Income Child Benefit Charge.

They also increase the amount of your basic rate tax band, meaning you can pay more tax at 20% and less at 40%.  The exact benefit depends on how much of your income would otherwise be taxed at 40%.

From your original post it looks like your taxable income is c£66.5k (plus any other income not previously mentioned such as interest or dividends).

Your gross pension contributions will be £16,500 so your basic rate band will be increased from £37,700 to £54,200.  You don't seem to paying higher rate tax on the full £16,500 so the additional tax relief due will be slightly limited but it will, subject to any other taxable income, bring your adjusted net income down to £50k.

You can get higher rate tax relief on the pension contributions on a provisional basis through your tax code if you want.  But I think you need a clear understanding of a few things before contacting HMRC about that.