If your employer operates the net pay arrangement then your
personal contributions are deducted from your salary before any
deductions for income tax. They may, depending on your contract of
employment, also be deducted before other deductions, such as trade
union subscriptions or season ticket loans, depending on your
personal circumstances.
This arrangement allows your contributions to pass directly
to the
scheme administrator and for the appropriate level
of tax relief, even for higher rate taxpayer, to be given
directly.
Example
Gross pay £20,000 Pension contribution (say 5%) £1,000 Net pay £19,000
National Insurance is calculated on the gross pay of £20,000. Subject to any other allowances or reliefs, your income tax will be calculated on £19,000 rather than £20,000.
| Glossary ( RPSM20000000) |
