Online Government Tax calculator giving me wrong information (i think?)

singhini

Ive just gone to this GOV online tax calculator and i think its giving me the wrong information (i think). Can someone confirm either way please. 

Website: Estimate your Income Tax for the current year - GOV.UK

I entered my annual salary as £20,000 and then said i was making 38% pension contributions and I'm below state pension age. 

It's suggesting my national Insurance tax is £594.72

I expected it to say £zero (as 38% pension contributions would bring my taxable income down to below the personal allowance)

Am i right or am i missing something? 

NoMore

The only way to reduce your NI thru pension contributions is by Salary Sacrifice, however you can't salary sacrifice below minimum wage.

The calculator does not take into account the nature of the pension contributions, for salary sacrifice you would put in your new reduced income instead as Salary Sacrifice is a employer contribution, they make on your behalf in exchange for you giving up some of your income.

flaneurs_lobster

singhini said:

Am i right or am i missing something? 

Yes you are missing the fact that your NI deduction is based on your gross pay BEFORE any other deductions are applied.

Dazed_and_C0nfused

singhini said:

Ive just gone to this GOV online tax calculator and i think its giving me the wrong information (i think). Can someone confirm either way please. 

Website: Estimate your Income Tax for the current year - GOV.UK

I entered my annual salary as £20,000 and then said i was making 38% pension contributions and I'm below state pension age. 

It's suggesting my national Insurance tax is £594.72

I expected it to say £zero (as 38% pension contributions would bring my taxable income down to below the personal allowance)

Am i right or am i missing something? 

Pension contributions you pay would not reduce the NI you are liable to pay.

£594.72 looks about right assuming you are paid in 12 equal money payments.

singhini

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

Isthisforreal99

singhini said:

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

You have totally ignored all the comments on pension contributions having zero effect on NIC unless they were paid by salary sacrifice. And if the pension payments werw relief at source they won't affect your tax position either.

Dazed_and_C0nfused

singhini said:

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

Your original question had nothing to do with tax.

It was about National Insurance.

You might also want to get a clear understanding of the method used to get money into your pension as the three commonplace methods all work in different ways.

Relief at source
Net pay
Salary sacrifice

chrisbur

Looking at previous posts you have advised that your pension contributions are through salary sacrifice so you are putting the wrong figure in.  Your gross pay has been reduced by whatever you have sacrificed, that is the figure you need.  You are not paying any pension from your salary your employer is paying the pension.

singhini

Isthisforreal99 said:

singhini said:

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

You have totally ignored all the comments on pension contributions having zero effect on NIC unless they were paid by salary sacrifice. And if the pension payments werw relief at source they won't affect your tax position either.

Yes I'm agreeing with you and all the previous comments 

singhini

Dazed_and_C0nfused said:

singhini said:

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

Your original question had nothing to do with tax.

It was about National Insurance.

You might also want to get a clear understanding of the method used to get money into your pension as the three commonplace methods all work in different ways.

Relief at source
Net pay
Salary sacrifice

Thankyou for this, i will look at the three different ways

i personably think of NI in the same way as income tax i.e. there both taxes [in my mind] though your correct in pointing out there different

Dazed_and_C0nfused

singhini said:

Dazed_and_C0nfused said:

singhini said:

Clearly i've miss understood the way im taxed.

I thought £20k divided by 12 months is £1,667
£1,667 less 38% = £1,033

£1,033 monthly taxable income is less than my £1,047 personal allowance [therefore no Income Tax or NI Tax]

Your original question had nothing to do with tax.

It was about National Insurance.

You might also want to get a clear understanding of the method used to get money into your pension as the three commonplace methods all work in different ways.

Relief at source
Net pay
Salary sacrifice

Thankyou for this, i will look at the three different ways

i personably think of NI in the same way as income tax i.e. there both taxes [in my mind] though your correct in pointing out there different

From what @chrisbur has said you aren't actually contributing to a pension.

But as a result you have a much lower (taxable) salary to what you seem to think.