Pension in Income Tax Calculator

magd36

Does anyone know what the "Pension HMRC" line in the income tax calculator is and how it is calculated?

TIA

JoeCrystal

Which income tax calculator are you referring to? There are dozen of them online after all.

magd36

Apologies.  It's the money saving expert tax calculator:

https://www.moneysavingexpert.com/tax-calculator/

tacpot12

It's the tax relief on your pension contributions that you receive from HMRC. 

magd36

tacpot12 said:

It's the tax relief on your pension contributions that you receive from HMRC. 

I thought that but it doesn't seem to work correctly for Scotland, even when you tick the "I live in Scotland" box.

If the salary is set at £50k and the pension percentage set to 12% (£6000) the HMRC tax is £2460 which seems correct tax relief. However, when you set it to 13% (£6500) the HMRC tax is £2339 which is lower tax relief in absolute terms than before?

Can that be right?

Dazed_and_C0nfused

magd36 said:

tacpot12 said:

It's the tax relief on your pension contributions that you receive from HMRC. 

I thought that but it doesn't seem to work correctly for Scotland, even when you tick the "I live in Scotland" box.

If the salary is set at £50k and the pension percentage set to 12% (£6000) the HMRC tax is £2460 which seems correct tax relief. However, when you set it to 13% (£6500) the HMRC tax is £2339 which is lower tax relief in absolute terms than before?

Can that be right?

Personally I think that calculator is incredibly misleading and gives totally inaccurate results.

The pension contributions are treated as "relief at source" contributions and the pension tax relief, which is only ever added to your pension fund, is being deducted from the tax you are supposedly going to pay giving a misleading outcome.

That isn't how relief at source contributions work, there is no direct link between the pension tax relief and how much tax you need to pay.  For example someone earning £10k and paying no tax can get £2,000 in pension tax relief (added to their fund).

magd36

That makes sense. I guess this also confuses the situation for salary sacrifice as well.

Thanks

Dazed_and_C0nfused

magd36 said:

That makes sense. I guess this also confuses the situation for salary sacrifice as well.

Thanks

Salary sacrifice means you aren't contributing to a pension, you are giving up salary in return for your employer contributing more.

So they are employer contributions which means no pension tax relief is added.

And as they are employer contributions you would never include them in that calculator.

magd36

Yes, I understand thanks.