Personal Allowance and Pension Tax Calculator

bms0921

Hi!

My salary is currently £100,000 and I have the potential to earn ~25% bonus annually, paid out in March. This is variable depending on performance / business results but is typically around £25,000. 

I completed a self-assessment for 2021/2022 in December 2022 and had an overpayment of £2800 which I'm repaying over 12 months. I have adjusted my estimated income online so my personal allowance is also being deducted. 

All of this means that my monthly income is ~£4,700 and has actually gone down about £300 since my pay increase. 

It feels like I'm missing something about maximising my salary. I know tax is 60% + 2% NI between 100-125k and I should maximise pension contributions but I can't find a calculator to help me work out what this looks like and the impact it would have on my take home pay on a monthly basis. I saw someone on another thread had figured this out but I was wondering if anyone knows a calculator or a tool I could do to work through this? My nervousness at putting more in a pension is that my brain assumes I'll have less money to take home but I don't think my understanding is correct and I can't work out how to calculate it. 

Can anyone point me in the right direction? 

Big thanks

Jeremy535897

If you pay £20,000 of your bonus into your pension scheme, that grosses up to £25,000 and extends your basic rate band by £25,000.

bms0921

I understand the principle but was hoping there was a calculator / tool available that could show what this looks like on a monthly basis / impact on my take home pay?

thegreencal1

You’re definitely not missing something — the £100k–£125k range is genuinely one of the weirdest parts of the UK tax system and it catches a lot of people out.

What’s happening is:

• You lose £1 of personal allowance for every £2 earned over £100k
• That creates the effective ~60% tax band between £100k and £125,140
• Then you still pay 2% NI on top
• Student loans can make it feel even worse

So a pay rise or bonus can sometimes barely move your take-home pay at all.

Where pension contributions become powerful is that they reduce your “adjusted net income”. So if you salary sacrifice or contribute enough to get your taxable income back down toward £100k, you effectively:

• regain personal allowance
• avoid the 60% trap
• reduce NI (if salary sacrifice)
• boost pension savings

For example, if your total comp is around £125k and you salary sacrifice £25k into pension:

• you may only see take-home reduce by roughly £9k–£10k
• but £25k lands in pension

That’s because you’re avoiding tax that would otherwise have been lost at very high marginal rates.

The best calculators I’ve found for visualising this are:

• Listen To Taxman
• The Pension Calculator
• HL Salary Sacrifice Calculator

The Salary Calculator is particularly good because you can:

• add bonus payments
• adjust pension %
• include student loans
• see monthly take-home changes instantly

One important thing: if your bonus is pension-sacrifice eligible, that’s often the most tax-efficient thing you can do in this income band.

Also worth checking whether your company pension is:

• salary sacrifice (best outcome usually)
• net pay arrangement
• relief at source

because the maths differs slightly.

Your instinct that “putting more in pension means massively less take-home” usually turns out to be wrong at this income level. In the 60% band, every £1 sacrificed can cost you surprisingly little in actual monthly cash flow compared to the pension gain.

decsdad

@thegreencal1 that’s a very comprehensive reply, thanks. I wonder (not meaning to hijack the thread, as this may also help OP) if you could help me with my confusion.

Very similar situation as OP(but in Scotland so 69.5% tax trap)

Salary 160k

Current pension SS 20k

Cars on SS. 15K

So siting at 125K so i need to do something with that 25k.

I can do more salary sacrifice into works pension scheme which would probably be the easiest and save the 2% NI too.

But…….can i do it differently ? Could I reverse the tax trap by paying cash (from net pay) into a SIPP, get the 20% relief, then claim the rest back via SA, and get my personal allowance back, and hence that tax refunded too ? So effectively put me back into the same position but instead of the 25k being in my pension it would be less,and i would get the rest back as cash (so using less AA too?).

I’m confused by this, and how much I would need to pay into a SIPP to make it work? ( i work out id get 7.6k of that 25k so surely i just have to pay that into a SIPP to reverse the trap?)

Many thanks

NoMore

https://forums.moneysavingexpert.com/discussion/comment/82002986#Comment_82002986

You wouldn't be any better off than using Salary Sacrifice, in fact you would be worse off because you would have to pay the extra NI.

Just because you get tax relief back doesn't mean you end up with anymore in your pocket than if you use Salary Sacrifice. You still have to end up with 25k in the pension either way to get your Personal Tax allowance back.

UKSalaryHelper

@decsdad— to put some numbers on what NoMore said:

You're at £125k adjusted income, so right in the middle of the personal allowance taper. In Scotland that's brutal, your effective marginal rate on that £25k is roughly 54.5% income tax (45% Advanced rate + 9.5% from the PA taper) plus 2% NI = 56.5%.

Route 1 — Salary sacrifice another £25k:

• Full £25k goes into pension
• You save the 2% employee NI (£500)
• Your employer also saves 13.8% employer NI (£3,450) — some employers pass part of this on, worth asking
• Take-home drops by roughly £10,875 (the £25k minus the ~56.5% you would have lost to tax/NI anyway)

Route 2 — SIPP from net pay:

• You first pay tax + NI on that £25k, so you receive roughly £10,875
• You put that £10,875 into a SIPP
• Provider claims 20% basic rate relief → SIPP becomes ~£13,594
• You claim back the rest (Advanced rate minus basic rate) via SA → refund ~£3,400
• SA also restores your personal allowance → further refund ~£3,140
• But you've already paid the 2% NI (£500) which you can't get back
• And you only end up with ~£13,594 in pension vs £25,000 with SS

To get the same £25k into pension via SIPP, you'd need to contribute more out of pocket to make up the difference. Either way, salary sacrifice puts you in a better position — same pension outcome but you keep the NI saving.