PTC tomorrow - my predicitons

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:27AM in AAT student discussion
Hi to those who are sitting the PTC exam tomorrow.

My tutors have told me to look at pensions, they have a suspicion that a question is likely to come up. I'm revising the differences between the two types and how to treat them in the Income Tax Comp.

I hope it's all been worth it!

Good luck for tomorrow :D

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PTC tomorrow - my predicitons

    Oh great that is one thing I really struggle with Im so going to fail again!! :cry:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PTC tomorrow - my predicitons

    I have some really useful notes that might help you.

    2 types of pension - occupational and personal

    Both types of pensions are goverened by the same rules as of 06.04.06

    Tax relief is only available for a max annual amount:

    The higher of £3,600 or 100% of net relevant earnings (employment + trading income)

    occupational

    * set up by employer
    * employer can contribute
    * employee can contribute

    Max. employee contributions:

    £215,000 per annum
    £1.5million per lifetime

    Annual allowance - if exceed £215K per annum the excess is charged at 40% The rest is deductable from your Employment Income calculation:
    Salary
    Add: Benefits
    Add: Bonuses
    Less:Allowances (ie. pension contributions)
    = Assessable income

    Life time allowance - if exceeded is charged to income tax - when individual withdraws the monies.

    To get higher rate tax relief - take the £31,150 band and add the gross amount of pension to it.
    E.g. Personal pension cont of £280 in the year

    BRB - £31,150
    Add: £280/100*78 = £218
    Then BRB becomes £31,368

    So first £2,150 @ 10% Non savings/savings/divs
    Then new BRB £31,368 @ 22% Non-sav/20% savs/10% divs
    Then the rest of your income @40% and 32.5% for divs.

    Personal pension

    *Set up by individual
    *Can have as many as you like
    *Instead of or as well as occupational pension

    For basis rate tax - ie where the Tax liability does not exceed £31,150 - you can earn the 22% deducted from pensions in the Employment Income calc. (shown above) Simply allow the Gross amount of pension rather than the net.

    I hope this helps,

    Kind regards and chin up :)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PTC tomorrow - my predicitons

    You may want to edit your helpful reply. You've done 78/100 not 100/78
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PTC tomorrow - my predicitons

    I hoping it's no more complicated than: -

    Occupational - deduct personal contribution from Gross Pay. By doing this you receive the full tax relief. No extension of bands. Ignore employer contributions. (Correct me if i'm wrong please)

    Personal - Gross up contribution by 100/78.

    E.g £1170 personal contribution - £1500 Gross.

    You receive the basic tax relief by the provider topping up your contribution to the tune of the missing £230 (reclaimed from Govt). If Higher Rate tax comes into play you extend the Basic Rate Band (22%) by the Gross Pension amount, i.e. £1500 in this case.

    Remember Gift Aid also extends the band.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PTC tomorrow - my predicitons

    Hi

    I think Alicia has been studying a different book to me! :shock:
    My Osborne book does not go into such detail, but I am not going to worry. All we need to know should be in the books provided for this level.

    All the best for tomorrow.

    Yas

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