Tax relief at source - worse off?

molerat

Comparing apples to apples.

Paying £10K into a net pay scheme.  No tax paid on £10K so take home is reduced by £6K with £10K in pension.

Paying £8k into a RAS pension, £2K added by provider giving £10K in pension.  Additional 20% on £10K, £2K, reclaimed so £10K in pension for £6K cost.

Paying £10K into a net pay scheme is not the same as paying £6K into a RAS scheme, apples and pears.

Do you understand it now ?

Shadyocuk

Why would you think that salary sacrifice of 10K and 6K from net are the same thing ????

If the objective was to get 10K into a pension then 

Option 1 would be 10K salary sacrifice

Option 2 would be 8K from net salary that would be grossed up by 2K tax relief at source to give 10K into the pension, if you are a higher rate tax payer then you would also claim back 2K via your tax return, so the net cost to you foe getting 10K into the pension is the same 6K.

DRS1

I see no-one wants to complicate things further by mentioning the impact of an income of £110000 on the personal allowance.  OP in your example both types of pension contribution save you a lot of tax because of the notorious 60% band which starts at £100k.

AmbitiousMan

DRS1 said:

I see no-one wants to complicate things further by mentioning the impact of an income of £110000 on the personal allowance.  OP in your example both types of pension contribution save you a lot of tax because of the notorious 60% band which starts at £100k.

Yes that is absolutely true. The taxes above 100K start to get borderline ridiculous (which is of course a subjective matter). I got a windfall bonus this year, otherwise this issue would not have been an issue for me!

Dazed_and_C0nfused

AmbitiousMan said:

DRS1 said:

I see no-one wants to complicate things further by mentioning the impact of an income of £110000 on the personal allowance.  OP in your example both types of pension contribution save you a lot of tax because of the notorious 60% band which starts at £100k.

Yes that is absolutely true. The taxes above 100K start to get borderline ridiculous (which is of course a subjective matter). I got a windfall bonus this year, otherwise this issue would not have been an issue for me!

But this "issue" doesn't exist, for you or anyone else.

AmbitiousMan

Dazed_and_C0nfused said:

AmbitiousMan said:

DRS1 said:

I see no-one wants to complicate things further by mentioning the impact of an income of £110000 on the personal allowance.  OP in your example both types of pension contribution save you a lot of tax because of the notorious 60% band which starts at £100k.

Yes that is absolutely true. The taxes above 100K start to get borderline ridiculous (which is of course a subjective matter). I got a windfall bonus this year, otherwise this issue would not have been an issue for me!

But this "issue" doesn't exist, for you or anyone else.

It existed for me

issue

/ˈɪʃ(j)uː,ˈɪsjuː/

noun

1. an important topic or problem for debate or discussion.

NoMore

It isn't a debate, your just wrong and have been told with explanations why by several people, but you appear to keep ignoring this. 

AmbitiousMan

NoMore said:

It isn't a debate, you’re just wrong and have been told with explanations why by several people, but you appear to keep ignoring this. 

Great, thanks

Sarahspangles

The OP demonstrated he now understood at lunchtime?

AmbitiousMan

Hi community members, there appears to be a misunderstanding so thought would clarify

 the concept was confusing for me, and I was trying to clarify my understanding. I showed my calculations and invited critique at the outset, and when I was shown where I was wrong, I acknowledged it. I think the part where I accepted the correction might not have been seen. 

 I appreciate the input from you and I am glad to have a better understanding now!