pay net value into SIP

AKW

Hi, please can someone help me with some calculations?

Dazed_and_C0nfused

If you have disclosed all his taxable income (£51,650) then he needs to make a gross relief at source contribution of £1,380.

Which would be him paying £1,104 and the pension company adding £276 in basic rate tax relief.

But he is never going to get £552 "back" as RAS contributions don't reduce his taxable income.  They will increase his basic rate band to £39,080 meaning more income is taxed at 20% and less at 40%.

Another question arose from his tax code having been reduced to 1110L because there was some untaxed income on his pay in the previous year. I don't understand how that will affect his 20% bracket, because surely he is still entitled to earn 12570 at 0% tax and pay 20% on the next 37700?

You need to provide the make up of his tax code to get to the bottom of that.

Dazed_and_C0nfused

AKW said:

great, thank you soooooooooo much for the explanation
Did I get this right now?:
without the contributions he would pay tax £7540 + £552 = £8092
with the contribution his tax would be 20% on £39080 = £7816 which is £276 less to pay and in addition he will get £276 added to his pension pot after paying £1104 into it. He has to pay out £7816 + £1104 = £8920, which is £828 more than without pension contrubution, but gains £1380 in his pension pot, a saving of £552. (Of course 75% of the pension will be taxable income, once drawn)
Instead of starting a SIP, is there an advantage in asking his employer to take another £1380 to add to his work pension scheme (if they still can do that before the tax year is out)
I am waiting to find out about the tax code make up

Yes, especially if they use the salary sacrifice method.

This would mean he agrees to give up £1,380 of his salary in return for the employer adding £1,380 to his company pension.

Not only does he avoid paying tax on the £1,380 sacrificed but he avoid paying NI on it as well.

But I suspect it is a bit late in the day for them to agree any changes now.