Does occupational pension extend the basic tax rate band?

Diesel3390

Hi All,

I had a question. I'm going in circles around whether occupational pension contributions extend the basic tax rate band or not? My understanding is that the basic tax band is up to £50,270. My occupational pension contribution is a mix of my own contribution and my company topping up with a company match. I believe it is NET PAY, meaning that the gross amount is added to the pension.

Or is it only private pension contributions (i.e. to my SIPP) that would count toward increasing the basic tax band?

My accountant says that occupational pension contributions will not count and that only private pension contributions count toward increasing the basic tax rate band. But everywhere I look on Google suggests that occupational pension contributions should also extend the basic tax rate band. 

Please help!

Dazed_and_C0nfused

Diesel3390 said:

Hi All,

I had a question. I'm going in circles around whether occupational pension contributions extend the basic tax rate band or not? My understanding is that the basic tax band is up to £50,270. My occupational pension contribution is a mix of my own contribution and my company topping up with a company match. I believe it is NET PAY, meaning that the gross amount is added to the pension.

Or is it only private pension contributions (i.e. to my SIPP) that would count toward increasing the basic tax band?

My accountant says that occupational pension contributions will not count and that only private pension contributions count toward increasing the basic tax rate band. But everywhere I look on Google suggests that occupational pension contributions should also extend the basic tax rate band. 

Please help!

No they don't count in the way you think.

But compare your salary to your taxable pay and you might be pleasantly surprised 😉

NB.  The type of pension isn't important, it's the contribution method, only relief at source contributions extend your basic rate band.

Vitor

It depends on how tax relief is given, not whether the pension is occupational or private.

If your workplace scheme uses net pay or salary sacrifice, your own contribution is taken from gross pay so your taxable income is reduced at source. You already get full relief and there is no extension of the basic rate band.

Only relief-at-source contributions (typically SIPPs) extend the basic rate band.

Employer contributions or matches never extend the band, as they are not taxable income.

Some occupational schemes do use relief at source, but most do not.

Isthisforreal99

If it is a net pay scheme then it won't extend the basic rate band as you have already had the tax relief via payroll (your pension payment is deducted before PAYE is operated)

Different pension schemes operate in different ways, some will be net pay scheme, some salary sacrifice and some relief at source, so there ia no one size fits all answer.

eskbanker

Diesel3390 said:

My accountant says...

Just to be clear, are you employed (in which case it would be unusual to have an accountant) or operating as a self-employed sole trader or limited company (in which case pensions and taxation are potentially more complex, in a good way!)?

poseidon1

I although you asked the question in a different way this time around, I think your answer can be found in your similar thread in April 2024 below- 

https://forums.moneysavingexpert.com/discussion/6518411/what-does-hmrc-do-with-the-other-25-on-pension-contribution#latest

Diesel3390

eskbanker said:

Diesel3390 said:

My accountant says...

Just to be clear, are you employed (in which case it would be unusual to have an accountant) or operating as a self-employed sole trader or limited company (in which case pensions and taxation are potentially more complex, in a good way!)?

Rental income....

Diesel3390

poseidon1 said:

I although you asked the question in a different way this time around, I think your answer can be found in your similar thread in April 2024 below- 

https://forums.moneysavingexpert.com/discussion/6518411/what-does-hmrc-do-with-the-other-25-on-pension-contribution#latest

thanks a lot for this. yes similar question i guess around taxing. this sort of stuff always gets me confused so worth clarifying here. much appreciated.