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Calculating new salary after salary increase (with pension deductions)

WagathaChristie
WagathaChristie Posts: 34 Forumite
10 Posts Name Dropper
Hi all, 

I work in the Civil Service and had a increase which came into force from this month.

I can see my new annual salary on this month’s payslip, but because the increase is backdated to 1 Aug (so I have 4 months’ worth of the increase on this month’s payslip - Aug, Sept, Oct, Nov), this month’s take-home pay doesn’t accurately reflect what it’ll be from next month onwards. 

I’m trying to work my new monthly take-home pay using online calculators, but not sure how accurate they are after I add in my pension payments. 
2 pension payments are deducted from my monthly gross salary: Alpha pension (5.45% deduction) and EPA (effective pension age - 3.7% deduction), which builds up a portion of my Alpha pension to be paid out 3 years before my normal pension age, which will be 68. Altogether, the pension deductions are 9.15% of my total gross monthly salary. 

I appreciate I could just wait till next month’s payslip at the end of this month, to get an accurate reflection of my new monthly take home pay, but want to find this out beforehand if poss. 

What would be the best way to work out my new monthly salary? On the online calculators, should I declare my total monthly pension deductions as 9.15%, along with entering details of other deductions (ie income tax, NI and student loan)? 

Or instead, is it more accurate to take the backdated salary increase on this month’s payslip and divide it by 4 (for Aug to Nov inclusive), and take 25% of that as the increase that will apply to my take home pay each month? 

I’ve tried both these methods, and the latter seems like a realistic and fairer increase (an increase of over £100, rather than the £96 increase I get with the first method of declaring 9.15% pension contribs on the online calculator). For reference, my new annual gross salary is just over £39k. 

Thanks! 

Comments

  • DE_612183
    DE_612183 Posts: 3,125 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    won't you get your December pay end of this week, which should be pay slip available either today or tomorrw?
  • Hi DE, thanks for your reply. I’ll get my pay at the end of the month (last working day of the month) and my payslip will be available to see a couple of days before then, but I just wanted to find out ahead of that if poss. 
  • DE_612183
    DE_612183 Posts: 3,125 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 16 December 2024 pm31 4:12PM
    ok, the way to do it is take your new annual salary - work out the pension deductions for the year, then use the online calculator to work out the tax.

    So for example - new salary = £50,000
    9.15% pension = 4575

    new salary amount - 45,425

    into a salary calculator comes up with:




  • Fab, thanks DE. Really appreciate your help with that! 
  • theoretica
    theoretica Posts: 12,685 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    If you run your old salary through the calculator does it give the right answer?  If it doesn't, then I wouldn't trust it for the new salary.
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
  • kinger101
    kinger101 Posts: 6,525 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 16 December 2024 pm31 5:38PM
    For reference, I think the above might have been run with thesalarycalculator.co.uk

    It's a very good tool but midyear tax code or pay changes are going to lead to month on month variability in take home pay

    "Real knowledge is to know the extent of one's ignorance" - Confucius
  • GunJack
    GunJack Posts: 11,769 Forumite
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    edited 16 December 2024 pm31 5:41PM
    Quick'n'dirty way:

    Subtract old salary from new salary, multiply by 0.62 and divide by 12 gives you the monthly takehome increase (assuming still a 20pct taxpayer). If a 40 pct, use 0.43 instead of 0.62

    This takes the gross annual increase, takes off your deductions(20pct tax, 8pct NI and 9.x total pension, so you lose approx 38pct of the gross increase)

    I'm a former civil servant, and that method is close enough for government work 🤣🤣
    ......Gettin' There, Wherever There is......

    I have a dodgy "i" key, so ignore spelling errors due to "i" issues, ...I blame Apple :D
  • hugheskevi
    hugheskevi Posts: 4,351 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 16 December 2024 pm31 6:03PM
    ok, the way to do it is take your new annual salary - work out the pension deductions for the year, then use the online calculator to work out the tax.

    So for example - new salary = £50,000
    9.15% pension = 4575

    new salary amount - 45,425

    into a salary calculator comes up with:




    That would be appropriate for a salary sacrifice pension scheme, but the Civil Service is net pay, so subtracting pension contribution from salary will lead to underestimating National Insurance contributions and so overstate net income. You need to put in the gross salary and the 9.15% pension contribution to get an accurate result from something like ListentoTaxman.

    Even then, it may not be accurate if the new salary is a bit over an income tax threshold but the previous salary was below, as there will be some headroom in the cumulative year-to-date salary below the higher tax threshold to use up. However, £39K is firmly in basic rate territory, so that shouldn't be relevant.

    I've always found it best to set up my expected monthly pay in spreadsheets calculating all deductions due from base data at the start of each financial year, ie, my own mini payroll. I can then very easily check each month if everything is correct and update as the year progresses - it is surprising just how many errors payrolls can make when things change, and doing this also helps keep pension records clean by resolving errors as they arise. It also aids with a detailed understanding of taxation, just using calculators for convenience rather than relying on them for results.
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