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Contributions to personal pension plans are ‘paid net of basic rate tax’
Can u explain that phrase for me?Well to my understanding it means that when you physically pay in £80 into your personal pension fund, tax man adds another £20. So you end up having on your pensions fund £100.
In other words, you pay in net amount into your pensions fund and tax man gross it up by adding the 20% (basic rate).
Somebody correct me if I am not right!!!
Well maybe it’s a bit clearer explanation I found on https://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792714&type=RESOURCES
“This means that for every £100 you contribute, £125 is actually added to your pension fund. This is because when you give £100 to the pension provider, this figure represents 80 per cent of the total you earned, before tax. So, the pension provider works out what 100 per cent would have been (£100/80 x 100 = £125) and claims the £25 back for you.”
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