andrew.feneley

So, to clarify, in both case A and B in my example above, adjusted net income would be £90,000?

I am calculating my adjusted net income for the purposes of eligibility for childcare hours/tax free childcare. My workplace pension scheme has a very high pension contribution rate and I was under the impression these were deducted for the purposes of calculating adjusted net income. A call I had with HMRC this week said that this was not the case as tax relief had already been applied. I am unsure then why private pension contributions are eligible for deduction for adjusted net income as they would also be eligible for relief. As a worked example: Case A (pension paid as workplace pension scheme) Earn £100,000 Pension £10,000 Tax calculated on £90,000 Tax/NI £27,439 Net pay (in pocket) £62,561 Case B (opted out of workplace scheme but paying same amount into private pension) Earn £100,000 Tax calculated on £100,000 Tax/NI £31,439 Net pay £68,561 Pension paid £8,000 (relief at source tops up to £10,000) Higher rate tax relief £2,000 In pocket £62,561 So in both A and B, gross income is £100,000, pension pot is £10,000 and cash in pocket at the end is the same. But Case A would have an adjusted net income of £100,000 but Case B has an adjusted net income of £90,000. Can you explain why this discrepancy exists? Is there a reason to deter people from paying into workplace schemes?