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Check my sums - Pension/Income Tax/National Insurance calculations

Discussion in 'Retirement' started by PeterQuint, Oct 15, 2017.

  1. PeterQuint

    PeterQuint Established commenter

    My other half intends to retire in a few years, only she won't be retiring completely, only from her current job, with which she has a decent pension.

    She'll be on a work pension + a salary from another job paying £18,000 (this job is sorted and waiting for her). We've calculated that her pension will be £13,000. So that's a total income of £31,000. She's asked me to work out her net income (take home pay), which I have done, but I wanted to check it. To be honest, I want to check it too, as it obviously impacts on me.

    She'll will be retiring in 2020, and the Income Tax allowance then is due to be £12,500. There's also an effective NI 'allowance' of £8,164pa. After that NI is 12%.

    She'll pay IT on both their pension and salary (minus the allowance), but I understand you don't pay NI on your pension, so she will only pay NI on the salary (minus the NI allowance).

    So here are the sums.

    Total income £18,000 + £13,000 = £31,000.

    Minus the £12,500 allowance = taxable income of £18,500. 20% of that = £3,700. So she'll pay £3,700 Income Tax a year.

    Income on which she'll pay NI is just the salary of £18,000. Minus the £8,164 allowance leaves £9,836 on which NI will be paid. NI is 12%, so 12% of that is £1,180.

    IT of £3,700 + NI of £1,180 = a total 'tax bill' of £4,880.

    Total income of £31,000 - total tax bill of £4,880 = net income after tax and NI of £26,120 or £2,176 a month.

    Okay, where have I gone wrong?

    Are my sums correct.

    Is my understanding of tax & NI correct?

    Cheers.
     
  2. wanet

    wanet Star commenter

    Pension payment for new role?
     
    PeterQuint likes this.
  3. PeterQuint

    PeterQuint Established commenter

    Good thinking - that's exactly the sort of thing I might not have considered.

    But no, there'll be no new pension payments.
     
  4. Rott Weiler

    Rott Weiler Lead commenter Forum guide

    That's how I would have calculated it too. You are correct that NI is not charged on pension income, only income tax. At the moment anyway.
     
    PeterQuint likes this.
  5. cupcake108

    cupcake108 New commenter

    see the Wesleyan thread
     
    PeterQuint likes this.
  6. PeterQuint

    PeterQuint Established commenter

    Thanks.

    Where’s that, then?
     
  7. FrankWolley

    FrankWolley Star commenter

    PeterQuint likes this.

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