Tax relief on AVCs

[ClinicallyProven]

I'm trying to work out what paying AVCs will "cost" me. I understand that there are tax benefits in that I don't pay income tax on the contributions, but I'm struggling to get my head round the calculation.

What is need to know is if, for example, I pay £600pm into an AVC via salary sacrifice, how much will my take home pay be reduced by? I'm a basic rate taxpayer.

Thank you!

I think its about 65% so reduced by £390. But you can't do it if it would take your take home pay below minimum wage. Which AVC company is your work going through, doesn't their website give examples?

The AVC comes off before tax.
So you need to take your gross salary, minus the AVC amount, minus any other non taxable items then take the basic rate tax off of that amount. (At least that's how it used to work when I used to do it).

You will not pay tax and NI provided the whole sacrifice is above the threshold for paying tax and NI so about £400.

I don't realise you save NI too. Thank you

starpatch. so does that mean someone working on minimum wage can't purchase AVCs? as it would automatically take them below the minimum wage

Depends. Deducting avc from your wage shouldn’t cause an issue. If it’s salary sacrifice and that causes your wage to drop below minimum wage I guess that’s a problem.

Yes if you are already on minimum wage you can't do salary sacrifice as it would take you below minimum wage. You can do additional voluntary contributions just not salary sacrifice.