Free money from the Governement?

Free money from the Governement?

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If I contribute my entire annual salary net of tax and NIC into my pension scheme, the scheme recovers basic rate tax on that contribution. However my salary was not all taxed at 22%, the first £5035 was tax at nil % and the following £2150 was only taxed at 10%.

Are the government giving me an additional contribution of £1678 for free or have I missed something?

I don't think there would be any effect on the personal tax calculation as the additional relief is only given as an extention of the basic rate band.

Surely the same would also apply to a GIft Aid reclaim by a charity where a person's income exceeds the personal allowance by less than the donation.

Neville Ford

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By User deleted
04th Apr 2007 06:54

On a pension contribution, you win. The extra tax is not clawed back. On a gift aid donation, if you are a non tax payer, any tax deducted at source will be clawed back by HMRC.

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