OWR and Pension contribution

Hi, I meet all the requirements of Overseas Workday Relief. My total earnings for the tax year are £180,000, out of which 33.33%, i.e. £60,000 are UK earnings. Currently getting paid salary offshore with corresponding tax deducted (only on one third of the income that is being generated in the UK). 1. If I were to salary sacrifice £25,000 into my pension plan in the UK (onshore), which of the following scenarios would apply: a) The pension contribution is deducted from my UK earnings, and therefore my taxable UK earnings are £60,000 - £25,000 = £35,000. Total tax payable is £35,000 @ 20% (basic rate) = £7,000 b) The pension contribution is deducted from my total earnings before calculating the UK portion of my income. Total earnings adjusted to be £180,000 - £25,000 = £155,000. UK portion of earnings would be 33.33% of £155,000 = £51,667. Total tax payable is £37,700 @20% (basic rate) + £13,967 @40% (higher rate) = £13,127 2. Would the answer change if the pension contribution was made not as salary sacrifice but as direct contribution with onshore UK money? Thank you very much in advance for your help. Have a nice day, Jaiminho

Hi 

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For an answer to a detailed question of this nature, you would need to contact our self assesment helpline on 0300 200 3310, contact our webchat facility at Contact HMRC or seek professional advice.

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