I can't seem to make online salary/tax calculators work properly!
e.g. https://www.moneysavingexpert.com/tax-calculator/ (happens on others too, this is just an example)
I put my annual salary in, and the monthly gross, tax and NI matches my payslip, but not my pension, which shows the contribution from me as the whole amount being contributed. i.e. a total monthly contribution of e.g. £1000 shows as £800 on my payslip - but as £1000 on the above/other calculators, which then throws my take-home out by exactly that 20%.
(This is on a "relief at source" scheme run by my employer - all tax etc is standard PAYG stuff, nothing complicated to add to the mix.)
Any ideas?
MTIA
Sats
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Salary calculators showing wrong pension cont - what am I doing wrong!
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
I may be misunderstanding, but if there is £1000 a month going into your pension, and you're only contributing £800, then perhaps the other £200 is some sort of pension-contribution-matching sum from your employer?
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- Lemon Slice
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
FoolishFilFive wrote:I may be misunderstanding, but if there is £1000 a month going into your pension, and you're only contributing £800, then perhaps the other £200 is some sort of pension-contribution-matching sum from your employer?
The £200 is the 20% basic rate tax relief (sorry, I did have that in my initial post but must have deleted it before finally posting)
My employer's contributions are separate to all this.
Sats
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- Lemon Slice
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
There are 2 different ways of handling tax relief on employee contributions.
One, which you seem to be in, is that the net amount is calculated and taken from your pay - here £800 - and the pension scheme claims the £200 from HMRC directly. This is fine provided you are not a higher rate taxpayer, who would have to claim their extra relief from HMRC in their self-assessment for example.
Two, more commonly used, especially by employers with many higher rate taxpayers, is that £1000 is deducted, and tax relief at whatever your marginal rate is, is simultaneously given to reduce that month's tax bill. So need to fill in tax claims. The scheme gets your £1000 and knows not to claim a further 20%. Your calculator is using this method.
One, which you seem to be in, is that the net amount is calculated and taken from your pay - here £800 - and the pension scheme claims the £200 from HMRC directly. This is fine provided you are not a higher rate taxpayer, who would have to claim their extra relief from HMRC in their self-assessment for example.
Two, more commonly used, especially by employers with many higher rate taxpayers, is that £1000 is deducted, and tax relief at whatever your marginal rate is, is simultaneously given to reduce that month's tax bill. So need to fill in tax claims. The scheme gets your £1000 and knows not to claim a further 20%. Your calculator is using this method.
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- Lemon Half
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
DrBunsenHoneydew wrote:Two, more commonly used, especially by employers with many higher rate taxpayers, is that £1000 is deducted, and tax relief at whatever your marginal rate is, is simultaneously given to reduce that month's tax bill.
What they do is increase the amount you can receive free of tax or free of higher rate tax. So you get the tax relief on the pension contribution by paying less tax. It can all work automatically under PAYE.
It's a method that's problematic with lower paid earners, or has been since the basic personal allowances were considerably increased from 2010 onwards. If you don't pay any tax whatsoever, you gain nothing from a notionally higher personal allowance.
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- Lemon Slice
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
DrBunsenHoneydew wrote:There are 2 different ways of handling tax relief on employee contributions.
One, which you seem to be in, is that the net amount is calculated and taken from your pay - here £800 - and the pension scheme claims the £200 from HMRC directly. This is fine provided you are not a higher rate taxpayer, who would have to claim their extra relief from HMRC in their self-assessment for example.
Alaric wrote:What they do is increase the amount you can receive free of tax or free of higher rate tax. So you get the tax relief on the pension contribution by paying less tax. It can all work automatically under PAYE.
I didn't include it in my OP as didn't think it was relevant, but I am a HR taxpayer and as Alaric says, I have an adjusted tax code from HMRC to account for that bit of it, and yes it is all sorted under PAYE.
Still not sure what's going on with the missing 20% though!
Sats
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- Lemon Slice
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
DrBunsenHoneydew wrote:Two, more commonly used, especially by employers with many higher rate taxpayers, is that £1000 is deducted, and tax relief at whatever your marginal rate is, is simultaneously given to reduce that month's tax bill. So need to fill in tax claims. The scheme gets your £1000 and knows not to claim a further 20%. Your calculator is using this method.
I missed this bit, but I think it possibly explains what is happening! Because my salary is in HR tax band, when I put that in the calculators, it automatically assumes the second method?
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- Lemon Quarter
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Re: Salary calculators showing wrong pension cont - what am I doing wrong!
Most employers simply deduct pension at source so tax is sorted in your payslip.
But, there is another thing to take into account - is your pension salary sacrifice, and if so, have you ensured you have ticked that box on the form you are submitting online? Specifically, make sure you do that on the *pension* bit, no other salary sacrifice part of the form (these forms are all different - this is my favourite one as it has more granularity: https://www.thesalarycalculator.co.uk/salary.php )
Presumably you are putting the pension in as a percentage and you are saying it is showing that percentage incorrectly?
Maybe it is your employer who is doing it wrong? Though, working out the % of monthly pay someone is paying into their pension isn't very hard!
Mel
But, there is another thing to take into account - is your pension salary sacrifice, and if so, have you ensured you have ticked that box on the form you are submitting online? Specifically, make sure you do that on the *pension* bit, no other salary sacrifice part of the form (these forms are all different - this is my favourite one as it has more granularity: https://www.thesalarycalculator.co.uk/salary.php )
Presumably you are putting the pension in as a percentage and you are saying it is showing that percentage incorrectly?
Maybe it is your employer who is doing it wrong? Though, working out the % of monthly pay someone is paying into their pension isn't very hard!
Mel
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