Pension contribution and Tax

tigerspill

Hi,

I am wondering ig you can help me relating to a question where earnings are less than the basic rate tax 20% rate - i.e. less than £12,750.

If I put say £1,000 into a SIPP, then HMRC will add £250 so I end up with £1,250 in my pension.

If I pay into a pension via my company, this is paid in as gross.  So using the same example where I put in £1,000, I dont think additional tax will be paid on top.

Have I got this right?  If so, It would not seem sensible to do this via my company, but to use a SIPP.

This doesn't seem right so I am assuming I have something wrong here in my understanding.

PS. I am ignoring SMART pensions and NI here for simplicity.

Thanks

xylophone

Those  members of a pension scheme who do not pay tax are disadvantaged if contributions are made through the "net pay" system.

https://www.which.co.uk/news/article/pension-tax-relief-issue-costing-lower-earners-over-140m-how-to-boost-your-pension-aAGqz5g5PiU7

But change is on the way.

https://www.pensionsage.com/pa/Govt-to-introduce-net-pay-tax-relief-top-up-system-from-2024-25.php

tigerspill

xylophone said:

Those  members of a pension scheme who do not pay tax are disadvantaged if contributions are made through the "net pay" system.

https://www.which.co.uk/news/article/pension-tax-relief-issue-costing-lower-earners-over-140m-how-to-boost-your-pension-aAGqz5g5PiU7

But change is on the way.

https://www.pensionsage.com/pa/Govt-to-introduce-net-pay-tax-relief-top-up-system-from-2024-25.php

Thanks for this.  Looks like the changes are a few years away.

Dazed_and_C0nfused

If you are referring to employer contributions then they will still not get tax relief even when those changes are introduced 

If I pay into a pension via my company

Exotoxin1

Can your company not reduce its profits assessable to corporation tax by the £1000 it pays?

tigerspill

Dazed_and_C0nfused said:

If you are referring to employer contributions then they will still not get tax relief even when those changes are introduced 

If I pay into a pension via my company

This relates to employee contributions.

Dazed_and_C0nfused

tigerspill said:

Dazed_and_C0nfused said:

If you are referring to employer contributions then they will still not get tax relief even when those changes are introduced 

If I pay into a pension via my company

This relates to employee contributions.

Ok, just employee contributions under net pay method are relatively uncommon with DC schemes.

Salary sacrifice/employer contributions are much more common.