Tax on income and savings

chinadog1

My salary takes me over the 40% tax bracket as I earn £51890 per annum. I do a salary sacrifice into a DC pension which is 10% of my salary and amounts to £5189 per annum. This makes my taxable salary £46701, i.e. 20% tax payer.
My question is - am I a 20% tax payer with regards to interest on savings because of the above, or do HMRC use my £51890 salary before any pension contributions to calculate the tax on savings interest? 
Cheers

Dazed_and_C0nfused

chinadog1 said:

My salary takes me over the 40% tax bracket as I earn £51890 per annum. I do a salary sacrifice into a DC pension which is 10% of my salary and amounts to £5189 per annum. This makes my taxable salary £46701, i.e. 20% tax payer.
My question is - am I a 20% tax payer with regards to interest on savings because of the above, or do HMRC use my £51890 salary before any pension contributions to calculate the tax on savings interest? 
Cheers

HMRC aren't interested in your "salary", it's your taxable pay which counts.  So if you have sacrificed some of it for additional employer pension contributions then it would be the £46,701 which matters.  That is presumably the amount you are on track to see on your P60 next April?

But no one can answer the question in bold as you haven't said what other sources (and amounts) of taxable income you have.

Also, do you make any pension contributions that might be relevant?

chinadog1

Thanks. I don't have any other pension contributions other than the salary sacrifice into the People's Pension as mentioned above. 
From what you've said as long as my interest on savings is below £50270 - £46701 = £3569, then I will pay 20% on savings interest?

Dazed_and_C0nfused

chinadog1 said:

Thanks. I don't have any other pension contributions other than the salary sacrifice into the People's Pension as mentioned above. 
From what you've said as long as my interest on savings is below £50270 - £46701 = £3569, then I will pay 20% on savings interest?

You aren't paying into People's Pension though so other than the impact on your taxable pay from the salary sacrifice they aren't relevant as you cannot get any tax relief on employer contributions.

But notwithstanding that if your total taxable income no more than £50,270 then you would be a basic rate payer and the interest would be taxed at 0% (first £1,000) and 20%.

friolento

chinadog1 said:

Thanks. I don't have any other pension contributions other than the salary sacrifice into the People's Pension as mentioned above. 
From what you've said as long as my interest on savings is below £50270 - £46701 = £3569, then I will pay 20% on savings interest?

Your interest payments are part of your total income. Your tax is determined by your total income. 

chinadog1

I am paying into People's Pension to the amount £5189 per year. I assume that this is my salary sacrifice that takes me to below the 40% tax threshold. My employer also continues 6% of my salary to the same pot but from what it's said here the employer contributions don't count for tax relief. So for my original question, as long as my savings interest doesn't push me past £50270 then I pay savings interest tax at 20%??