Is it better to have my pension contribations made from my gross or net salary?
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804MikeGG1 postedYou don't usually have any choice.
If you are a basic rate taxpayer it makes no difference. Either gross contributions are paid in or net contributions are grossed up as they arrive. In both cases it is straight away.
However, for higher rate taxpayers it makes a big difference, especially the first year. With gross contributions you get the full tax relief immediately.
Net contributions are only grossed up by the basic rate and you have to reclaim the extra tax relief during the next tax year. After the first year it is possible to get your Notice of Coding adjusted to get the extra tax relief, but only at the previous contribution rate. Contribution increases will still lag a year behind for tax relief.
Mike
Posted on 16 March 2010 |
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1Pidgeon posted
The best situation if it's available to you is to reduce your salary in exchange for a higher employer's contribution. This means that as well as getting immediate income tax relief at your highest rate you avoid paying NI in your contributions.
Be careful, though. For some people this could impact on entitlement to State benefits. Take independent advice.
Posted on 05 April 2010 | Love 0 loves
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