personal tax

meibaker

in personal tax, does tax band increase if a individual pays pension?
Q: roman has gross annual salary of £38.500, which PAYE of £6.400,he pays 3% of his annual salar into a occupational pension scheme. he also pays £215 to an approved professional body. all his benefits total are £16,162
what's his net income tax payable?
what i did was employment income £38.500+£16,162=54,662
less subscription..................................................(215)
pension £38,500x3%= ..........................................(1155)
total income .......................................................53,292
less PA ..............................................................(6,475)
Taxable income ...................................................46.817
tax band is increased from 37,400 to £38.555
38,555x20%
(46817-38,555)x40%
but the suggested answer didn't increase the band, please someone tell me why??

Gem7321

Yes you should increase the basic rate band when the taxpayer contributes to a personal pension, the same way you do for gift aid

Ampsie

meibaker wrote: »

in personal tax, does tax band increase if a individual pays pension?
i am so confused at the moment, for some reason i think the tax band do increase just like in the business tax, but in one of the exam, suggested answer didn't increase the tax band even though he pays pension? confused??
this question is from bpp book practice exam 3, 1.3.
thanks

Hi Meibaker,

i think i'm right in saying that if the pension is an occupational pension (provided by the employer) it's given tax relief in the employment income - so the tax band wouldn't go up.

If it's a Personal Pension Plan (set up by the employee) then the tax band is increased by the gross payment.

Ampsie
:-)

jewels.p

meibaker wrote: »

in personal tax, does tax band increase if a individual pays pension?
i am so confused at the moment, for some reason i think the tax band do increase just like in the business tax, but in one of the exam, suggested answer didn't increase the tax band even though he pays pension? confused??
this question is from bpp book practice exam 3, 1.3.
thanks

If it is a personal pension then yes. If they pay into the company pension no that gets deducted from the assessable amount

meibaker

yeah the pension is an osscupational pension scheme!
thanks so much, so glad i did ask this question now!

jewels.p

meibaker wrote: »

yeah the pension is an osscupational pension scheme!
thanks so much, so glad i did ask this question now!

No probs. It took me a while to understand this too but have finally got it drummed into my head (watch this I will have a brain freeze in the exam now) lol