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Paying into pension earning less than personal tax allowance
Comments
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NI is assessed on a payment basis (weekly, monthly, etc) while income tax is assessed on an annual basis. It is likely that if income is below personal allowance then no NI is being deducted, but ONLY if the part time work is evenly distributed across the year.
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Take a salary of about £30K, pay about £1500 into employer pension (not sal sac), leaving taxable pay of £28.5K. Tax is £3K, NI is £1300, so take home about £23.2K. If the person then feeds 80% of £28.5K to SIPP, so £22.8K, and tax relief adds £5.7K. Hence pension fund gets back all the tax paid, all the NI paid and a bit more.
Only makes sense if there is another household income to live on, and the other income is not able to be contributed to pension.0
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