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If an employee has a gross salary of 10000 and pays 1000 into a pension scheme, how much will be accounted for in the income tax computation? 10000 or 9000?
If the employee is making a contribution into an occupational pension scheme then you would deduct the £1,000 from the £10,000 salary. Remember that the contribution made by the employer would be an exempt benefit for the employee.
If the employee contribution was into a personal pension scheme however then there would be no deduction from the gross salary as basic rate tax relief is given at source and we do not deduct the contribution from the taxpayer’s income. Always read carefully what type of scheme the taxpayer is paying into!
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