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Hi,
If Bob pays £5000, into an occupational pension scheme and £5000 into a personal pension scheme, and earns £40,000, is his ANI £30,000 or £35,000? And do the tax bands get lifted by £5000 or £10,000? Getting a bit muddled with this.
Thanks for the help!
Izzy
Firstly see page 69, chapter 10 of the OT notes for comparison of treatment of pension contributions.
Occupational scheme contributions are paid gross and deducted from employment income in deriving the taxpayer’s figure of net income. Hence Bob will have net income of 35,000. PPC’s are paid net and do not reduce net income on the computation but the gross contribution is deducted in deriving ANI should that figure be required. If Bob actually paid 5,000 the gross contribution would be 6,250 and this would be deducted from net income to give ANI of 28,750.
The gross 6,250 would also extend the basic rate band, although with Bob’s level of income it would be irrelevant as his taxable income is within the normal basic rate band.
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