The Pearson Pension Plan

This page helps explain different taxes and provides information on the types of tax relief available.

We have partnered with WEALTH at work to provide a programme of webinars covering a range of topics from pension basics to understanding tax and planning for retirement, as well as wider financial issues. The webinars vary in length, and all have the opportunity for you to ask questions. You will receive an email from the Plan if you are eligible to attend.

How your income is taxed

Your payslip will likely have deductions shown for tax and National Insurance. The rate that will be deducted for both is based on your income and is separated into tax bands.  

Tax bands refer to the income on which different tax rates will apply to you. Below are the tax bands applicable for the 2024/25 tax year.

Please note, both tax rates and National Insurance deductions are regularly reviewed by the Government. We have included a link below to the Government’s dedicated page for the most up to date information. 

Personal Allowance	No tax is paid on the first £12,570 that you earn.
Basic Rate	20% tax applied on income over the personal allowance.
Higher Rate	40% tax applied on income over £50,271.00
Additional Rate	45% income tax rate to any income over £125,141.

What is National Insurance?

National Insurance is an additional tax used to fund the State Pension, Maternity Allowance, the NHS and additional benefits. The amount of National Insurance you pay will be based on your income.

Personal Allowance	No National Insurance is paid on the first £12,570 that you earn.
Basic Rate	12% National Insurance deduction applied on income over the personal allowance.
Higher Rate	2% National Insurance deduction is applied on income over £50,271.00.

• What to note if you are a higher rate taxpayer

  If the higher tax bands apply to you there are a few important points to consider.

  • Additional tax rate for earnings over £150k
  • Loss of tax-free childcare at £100k
  • Loss of tax-free child benefit if you or your partner’s adjusted net income is over £50k
  • Personal allowance reduces over £100k
• Student Loan

  If you have a student loan you will start repaying after your income exceeds a certain amount. This will be dependent on a few factors such as the area of the UK your loan is applicable to and when the loan started. The HMRC website will be updated with the most recent information, you can find a link at the bottom of the page.

Government help and other types of tax relief  

• How to reduce your tax through pension contributions and salary exchange

  Your pension can be a great tax-efficient way to save for your retirement as your pension contribution is deducted before tax on your salary is calculated. You can also save on National Insurance if your pension contributions are made using salary exchange.

• Marriage allowance

  The marriage allowance is a UK tax benefit that could save you and/or your partner tax. It allows you to transfer a portion of your personal allowance (the amount of income you earn before paying tax) to your spouse or civil partner, reducing the amount of tax that the higher earner might have to pay.

  To be eligible for the marriage allowance:

  • you must be married or in a civil partnership
  • the partner transferring their allowance must be a non-taxpayer or earning below the personal allowance
  • the partner increasing their allowance must be at least a basic rate taxpayer.

  You can find links below to GOV.UK and the MoneyHelper websites where you can read more about the marriage allowance.

  Please note that the marriage allowance should not be confused with the married couple’s allowance. To be eligible for the married couple’s allowance the marriage must have taken place before 5 December 2005 and one partner would have to be born before 6 April 1935. For more information on the married couple’s allowance please use the link to the government’s website below.

• Tax-free childcare support

  This is a government scheme to help working parents afford childcare such as nurseries, registered childminders, after-school clubs and more. You will be able to claim up to £2,000 a year for each child (£4,000 if your child is disabled). The scheme works by every time you pay in £8 the government will add £2. We have included a link below for further reading and to check eligibility.

• Council tax discount

  You can save anywhere from 25% to 100% on your council tax if you meet certain criteria. You may be eligible for a council tax reduction if you:

  • live alone
  • are living with someone with a disability
  • receive benefits such as, pension credit, income support or jobseeker’s allowance.
  • are on a low income
  • have moved into a care home or hospital
  • are a student.

  A link to MoneyHelper’s guide on council tax, including eligibility criteria, is included at the bottom of the page.

• Dividend tax

  A tax that is applicable to individuals who own shares in a company and receive dividends. The amount of tax paid will be dependent on your income. We would recommend visiting the HMRC’s website for the most up to date information on dividend tax. Links to GOV.UK and Which? are included below where you can read more about dividend tax.

• Capital gains tax

  This is a tax that is applicable to profit from the sale of certain assets such as real estate, investments, or bonds.

• Inheritance tax

  This is a tax that is usually applicable to the total value of a deceased person’s estate. A link to MoneyHelper’s guide to inheritance tax is included below.