I've recently received my PAYE Coding notice and I'm trying to establish whether the Personal Pension Relief is correct (and how indeed it is calculated!).
Can anyone confirm or correct my understanding of how this works?
Let's say I earn £48,000 p.a. (salaried so considered a 40% tax payer).
If I contributed 5% of my salary to my personal pension and my employer also contributed 5%, then my pay slips would look something like this...
Employees Cont £160 (5% of £4000 monthly gross salary - 20% tax taken at source and reclaimed by the pension provider to make the contribution back up to £200)
Employers Cont £200 (5% of £4000 monthly gross salary)
Now, on the PAYE Coding notice it states that as it expects me to pay 40% tax this tax year I'm entitled to further relief.
The question is, how is this figure then calculated????
Is it the £160 I pay monthly x 12 and the additional 20% tax readded?
i.e. (£160 x 12) x 1.25 = £2400 (The same as my employers gross contribution?)
Is it just the difference between the Gross contributions and the Net contributions for the year?
i.e. £2400 - £1920 = £480
Or have I missed the whole point
Sorry if this seems a simple/stupid question.
Thanks in advance