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  • FIRST POST
    • joannajmiller
    • By joannajmiller 14th Mar 18, 2:31 PM
    • 19Posts
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    joannajmiller
    Can someone confirm my calcs for pension contr?
    • #1
    • 14th Mar 18, 2:31 PM
    Can someone confirm my calcs for pension contr? 14th Mar 18 at 2:31 PM
    I'm getting myself in a right pickle...!

    I'd like to make an extra contribution to max benefit from higher rate tax relief on pension contributions.

    I'm struggling with the maths and wondered if someone could check for me?

    In 2017/2018 I will earn gross pay £44653
    My personal allowance is £5436 due to co car mainly
    I'll have made £3450 in gross pension contributions (with 20% relief at source)
    £844 childcare vouchers
    My taxable pay is therefore £34923

    If I make a gross additional contribution of £1400 gross I should therefore benefit by £560 higher rate relief? I think £1400 is the max I can make (to benefit from 40% relief) as anything more then brings my taxable pay into standard rate?

    Am I getting this...?
Page 1
    • lisyloo
    • By lisyloo 14th Mar 18, 2:44 PM
    • 21,871 Posts
    • 10,575 Thanks
    lisyloo
    • #2
    • 14th Mar 18, 2:44 PM
    • #2
    • 14th Mar 18, 2:44 PM
    Are you doing salary sacrifice? or are you paying from your net pay?

    i.e does your employer deduct from your gross salary and NOT charge you tax and NI
    OR
    do you pay from net pay after tax and NI and then the scheme claims back the basic rate?

    If you compare your payslip with your pension contributions you should be able to see this. In this first case the amounts will be the same. In the second the contributions should be higher as basic rate tax is added back in.
    • Linton
    • By Linton 14th Mar 18, 3:23 PM
    • 9,394 Posts
    • 9,527 Thanks
    Linton
    • #3
    • 14th Mar 18, 3:23 PM
    • #3
    • 14th Mar 18, 3:23 PM
    Your calculations seem about right to me, though I dont know for sure how childcare vouchers fit into the equation. As lisyloo indicates, exactly how you will receive the 40% tax relief depends on the details but the net effect should be the same.
    • lisyloo
    • By lisyloo 14th Mar 18, 3:51 PM
    • 21,871 Posts
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    lisyloo
    • #4
    • 14th Mar 18, 3:51 PM
    • #4
    • 14th Mar 18, 3:51 PM
    The overall benefit is the same, but if only 20% tax relief goes into the pension then the extra 20% needs reclaiming and generally goes into your pocket.
    • joannajmiller
    • By joannajmiller 14th Mar 18, 4:07 PM
    • 19 Posts
    • 7 Thanks
    joannajmiller
    • #5
    • 14th Mar 18, 4:07 PM
    • #5
    • 14th Mar 18, 4:07 PM
    do you pay from net pay after tax and NI and then the scheme claims back the basic rate? <------- this. 20% is added by my scheme.
    • joannajmiller
    • By joannajmiller 14th Mar 18, 4:14 PM
    • 19 Posts
    • 7 Thanks
    joannajmiller
    • #6
    • 14th Mar 18, 4:14 PM
    • #6
    • 14th Mar 18, 4:14 PM
    The overall benefit is the same, but if only 20% tax relief goes into the pension then the extra 20% needs reclaiming and generally goes into your pocket.
    Originally posted by lisyloo
    Yes I do a tax return annually anyway although there is some relief already within my code.

    It's more about working out how I can maximise this benefit
    • lisyloo
    • By lisyloo 14th Mar 18, 4:20 PM
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    lisyloo
    • #7
    • 14th Mar 18, 4:20 PM
    • #7
    • 14th Mar 18, 4:20 PM
    It's more about working out how I can maximise this benefit
    There are still financial benefits to putting money taxed at basic rate into your pension if you can afford to do so.

    When you receive the money you get 25% tax free.
    In addition you get your personal allowance free each year (0% tax) when you are taking income.

    But yes the best benefit in on the 40% bit.
    • joannajmiller
    • By joannajmiller 15th Mar 18, 7:22 AM
    • 19 Posts
    • 7 Thanks
    joannajmiller
    • #8
    • 15th Mar 18, 7:22 AM
    • #8
    • 15th Mar 18, 7:22 AM
    Yes good point - noted.
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