Pension / Adjusted Net Income - What am I missing here? 15 July 2022 at 3:41PM in Cutting tax 3 replies 161 views

thirtytoseventy

I am scratching my head here and wondering if I've been misunderstanding something for years. My personal tax account is saying that I've paid the right amount of tax for 21-22, whereas running the fingers through a third party taxcalc website I'm getting a lower 'total tax' figure which leaves me thinking I'm due a refund. It's certainly to do with the pension contribution; it would seem that on the third party calculator it is deducting my stated pension contribution from my gross income after PA, then taking the 20% off the adjusted net income. My actual tax paid for the year is a straight-up 20% after the PA is deducted. I'm in Alpha with the CS and I can't quite work this one out, can anyone show me where I'm missing a trick? Does the adjusted net income only apply to private schemes i.e. not defined benefit? Or is this to do with salary sacrifice?

Dazed_and_C0nfused

You cannot deduct pension contributions into the alpha scheme.

They are "net pay" contributions so your taxable pay (P60) already reflects them.

Essentially you are double counting them.

thirtytoseventy

Thanks for that. Seems like these tax calculators online don't make the distinction!

Dazed_and_C0nfused

There are at least 4 methods to get money into a pension and people often don't understand which method is being used so even where the calculator does allow different options they don't get the correct result as the data input is wrong.

Net pay (a lot of DB schemes like Alpha)
Relief at source (for most DC contributions)
Salary sacrifice 
Gross with no tax relief whatsoever at point of payment (typically used for large one off contributions to public sector schemes)