How are personal pension contributions calculated on self assessment form

Hi, I am likely to have taxable income of approximately 57,000 this year. I have been paying into a personal pension and to reduce my taxable income to below 50,000 to avoid repaying any child benefit. When I enter the amount on my self-assessment I am aware that I enter the total contribution (my personal contribution + 20% from HMRC), but I don't know how the calculation is done. So my question is how much do I have to pay into the pension to get my taxable pay below 50,000 Will it be 7000 + (1750 hmrc contribution) = 8750, or Will it be 5600 + (1400 hmrc contribution) = 7000 Many thanks for any advice

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  • Strummer22
    Strummer22 Posts: 592
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    Assuming your pension is relief at source (i.e. you pay tax on your total salary including your pension contribution, and the pension provider then adds the 20% basic rate tax relief), then the calculation is the latter. Your contribution of £5,600 will be 'grossed up' to £7000, taking your adjusted net income to £50,000 and avoiding the HICBC.

    Make sure you include all other income, e.g dividends and interest on savings, in your calculation of adjusted net income. It's the total amount that needs to be below £50k to avoid repaying child benefit. So if you receive £1,000 savings interest you would need to pay an additional £800 into the pension to avoid the HICBC. Even though the first £1,000 of savings interest is taxed at 0%, it still counts towards adjusted net income.

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,819
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    edited 7 February at 7:29AM
    Scottie71 said:
    Hi, I am likely to have taxable income of approximately 57,000 this year. I have been paying into a personal pension and to reduce my taxable income to below 50,000 to avoid repaying any child benefit. When I enter the amount on my self-assessment I am aware that I enter the total contribution (my personal contribution + 20% from HMRC), but I don't know how the calculation is done. So my question is how much do I have to pay into the pension to get my taxable pay below 50,000 Will it be 7000 + (1750 hmrc contribution) = 8750, or Will it be 5600 + (1400 hmrc contribution) = 7000 Many thanks for any advice
    Paying into a personal pension won't reduce your taxable income.

    The good news is that HICBC isn't based on taxable income but it's Adjusted Net Income which counts and RAS pension contributions do reduce your ANI.

    And they get basic rate relief added by the pension company (courtesy of HMRC).

    And they increase your basic rate band (by the amount of the gross contribution).

    And you don't get 20% added, it's actually 25% i.e. you pay £100 and £25 is added.

    You would need to pay £5,521 net which will have £1,380 in basic rate relief added, making a gross contribution of £6,901.

    £57,000 taxable income less £6,901 = £50,099 (£1 less than the starting point for HICBC).

    Don't forget you need to include all taxable income, even that which is taxed at 0% like the first part of any (taxable) interest and dividends.
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