tax rules on pension payments
Discussion
Okay, apologies for all the topics, but such is an issue working for a company thats never dealt with UK tax before...
in a nutshell - in my old company, i had a pension payment agreement - they matched my £100 a month payment.
However, they only took £78 (which went up to £80 this year) due to something to do with tax rules on pensions (i think because it was taken from Net or something).
My new company is taking £100... and I'm trying to explain this to them, but, frankly, struggling as i cant find anything on hrmc.gov.uk that explains this.
Does anyone have a link to something that can explain this to them, or just give me a decent statement that would sort it?
cheers.
in a nutshell - in my old company, i had a pension payment agreement - they matched my £100 a month payment.
However, they only took £78 (which went up to £80 this year) due to something to do with tax rules on pensions (i think because it was taken from Net or something).
My new company is taking £100... and I'm trying to explain this to them, but, frankly, struggling as i cant find anything on hrmc.gov.uk that explains this.
Does anyone have a link to something that can explain this to them, or just give me a decent statement that would sort it?
cheers.
Whenever an employee or his employer pays money into a pension scheme for that employee, the government adds an extra amount into the pension fund. The extra amount the government pays is on the assumption that you had already paid income tax at basic rate on the sum that was initially paid in. Up until 5 April the basic rate of tax was 22%.
So, if you wanted to make a monthly contribution into your personal pension of £100, all YOU (or your employer) had to do was actually pay £78. The government lobbed in the missing £22 on the understanding that you had already suffered a tax deduction of £22 in order to have the original £78 in the first place.
Since 6 April 2008, the basic rate of Income Tax has been 20%. Therefore, in the same scenario as above, the initial contribution would now be £80 with the government adding in the missing £20.
If your new employer wants to pay £100 into the fund, let them. The government should now add in an additional £25 (making an overall pension contribution for the month of £125).
The big provisio is that the pension fund needs to be a UK tax approved fund. If your employer is foreign based, their pension fund might not be approved. You need to check out the situation.
So, if you wanted to make a monthly contribution into your personal pension of £100, all YOU (or your employer) had to do was actually pay £78. The government lobbed in the missing £22 on the understanding that you had already suffered a tax deduction of £22 in order to have the original £78 in the first place.
Since 6 April 2008, the basic rate of Income Tax has been 20%. Therefore, in the same scenario as above, the initial contribution would now be £80 with the government adding in the missing £20.
If your new employer wants to pay £100 into the fund, let them. The government should now add in an additional £25 (making an overall pension contribution for the month of £125).
The big provisio is that the pension fund needs to be a UK tax approved fund. If your employer is foreign based, their pension fund might not be approved. You need to check out the situation.
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