In one of the previous exam questions when calculating the NI they don't deduct the gross pension contributions from employment income so they are paying NI on the pension but I thought this was tax and NI exempt......?
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TXpension and NI
If the pension payment is made gross from salary it will by pass all the income and NI taxes as it is taken before tax.
If the pension payment is made after receiving the salary the grossing up of the pension contribution is only to offset extend the basic rate band. NI will not be reclaimable.
That is why it is often more beneficial for the individual to make pension payments gross to save on 12% NI.
If part of a salary sacrifice scheme the calculation is carried out as suggested by Needs to Pass.
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