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Question :
Do either of the two methods
– net pay arrangements (for : occupational schemes —– by employer operating tax return to HMRC by PAYE )and
– tax relief given @ source ( for : Personal pension schemes —by completing a tax return by one’s self—)
generate SAME NET INCOME for the employee. ???[—-i.e.—- if you consider the same figures for both methods of tax calculation :
GROSS SALARY : £200PENSION CONTRIB… BY INDIVIDUAL: £80
CONTRIBUTION : £20
BY HMRC ( for personal pension sch ) / BY EMPLOYER (for occup…al sch)TAX RELIEF : 10%
is the same amount of net income generated for the member of occupational sc & Personal pension sch?
OR
is it that same figures can not be used as the tax relief % will be different in accordance with the type of pension scheme one uses ; therefore ultimately the net pay can never be the same if one decides to use either of the methods….)DISCLAIMER: the question does not consider the beleif of the individual to be using both schemes at the same time.I.E.: if one was to use either of the two cosidering the same figures, what would be the result in terms of the net income one lands at in the end….
Many thanks.
Khisal.
Firstly forgive me but I found parts of your question confusing and difficult to understand but allow me to state what you need to know – as provided within chapter 10 of the OT notes.
Employee contributions to an occupational pension fund reduce the employment income assessment of the taxpayer and therefore reduce the net income on the income tax computation.
Contributions made by an individual to a personal pension scheme do NOT reduce the net income of the taxpayer on the income tax computation, instead tax relief is given at the basic rate at source, meaning that an £8,000 contribution provides the individual with a total credit to his or her pension fund of £10,000. If the taxpayer is then either a higher or additional rate taxpayer the gross amount of the pension contribution will then extend both the basic rate band and higher rate band limits.
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