Tax relief on pension contribution

[rfisher]

Does taxable pay relate in any way to National Insurance?

So if I earn 100k gross, my taxable pay is 100k - 11.5k = 88.5k

20% income tax is due on the next 33.5k and 40% on the next 55k.

I will have paid ~10% NI as well, but does this get taken off the taxable pay figure gross or net of income tax.

Need to know to work out how much I could chuck at my pension to get full tax relief on it.

Ta.

[Eric Mc]

Pension Contributions limits are based on Gross Earnings - NOT Net Taxable pay.

[rfisher]

I probably haven't explained the question very well.

If I earn 100k gross and make a 100k additional contribution to my pension, will I get tax relief on 100k - 11.5k (88.5k taxable earnings) or 88.5k - 10k NI = 78.5k?

Or do NI contributions not get counted when calculating taxable pay figures?

Or do they come out of my gross earnings before income tax is paid?

[anonymous-user]

anonymous said:

[redacted]

Don't most employers just reduce gross pay? (Which would automatically relieve at highest rate first). They did in my day. Otherwise, yes it would have to be claimed back through tax return.

[anonymous-user]

rfisher said:

Does taxable pay relate in any way to National Insurance?

NI is paid on gross pay.

[-Pete-]

You get tax relief on £40K gross contribution per tax year, after that there's no tax relief.

[otherman]

-Pete- said:

You get tax relief on £40K gross contribution per tax year, after that there's no tax relief.

..although you can carry over unused allowance from the previous three years. So if you haven't paid into a pension previously, you could pay in £160k.

As has been said, gross pay minus NI, then minus pension payments below limit = taxable pay. NI is only 12% on the first £45k salary, then 2%.

[bogie]

anonymous said:

[redacted]

Yes you do a self assessment and claim it back that way, if the amount paid in is a regular sum HMRC will just adjust your tax code to give you the relief that way

[PurpleMoonlight]

The rules:

You cannot claim more tax relief than the tax you pay in the tax year on earned income. So limit the contribution to taxable income.

If your contribution is paid under relief at source you pay net of basic rate that relief and the provider reclaims the basic rate tax, You then claim any higher rate tax relief via your annual tax return,

The annual allowance is currently £40,000 but you also can carry forward any unused annual allowance from the three previous tax years, but you must have some pension provision in existance for those tax years even if you did not contribute to it. If you have no prior pension provision there is no carry forward available. If you do use carry forward your contribution is first allocated to the current tax year, then to the furthest carry forward year, eg 2017-18 then 2014-15.

You can't avoid NI under relief at source, but potentially could under a salary sacrifice pension contribution. This is where you agree with your employer to sacrifice some salary and they agree to pay an equal corresponding pension contribution.

Edited by PurpleMoonlight on Thursday 16th November 03:02