Summary
Pension contributions currently do not receive automatic tax relief in Timeline Planning.
Timeline does not yet model either Net Pay Arrangement or Relief at Source.
Pension contributions may not reduce taxable income as expected in some cases.
Advisers can manually adjust entries to reflect the intended tax treatment.
Description
Timeline Planning allows advisers to model pension contributions with flexibility, but it's important to be aware of how tax relief is currently handled in the tool. A common question we receive is whether Timeline assumes Net Pay Arrangement or Relief at Source when contributions are made. Neither method is applied automatically.
How Contributions Are Treated
Timeline currently treats pension contributions as gross amounts without automatically applying tax relief—regardless of whether the income is from employment, self-employment, or another source. This means that contributions do not reduce taxable income within the model as they might in real life.
To illustrate the difference between real-world treatment and how the tool currently handles contributions, here’s an example.
Example
Maria earns £50,000 in employment income and contributes £20,000 to her pension.
Net Pay Arrangement Behaviour:
Maria’s pension contribution reduces her taxable income to £30,000, with tax applied only to that amount—reflecting immediate tax relief.
Current Behaviour in Timeline:
Timeline does not reduce Maria’s taxable income, so income tax is calculated on the full £50,000. This leads to higher tax than expected and doesn’t fully reflect the benefit of pension contributions.
How to Reflect Intended Tax Treatment
While Timeline doesn’t yet apply tax relief automatically, you can adjust the inputs to achieve the same outcome as a Net Pay Arrangement.
Here’s how to do it using Maria’s example:
Add a pension contribution using "Not from an income source."
Enter the gross amount of the contribution—in Maria’s case, £20,000.
Reduce the income source—in this case, Maria’s Employment income—by the same amount (£20,000).
Here's how you would set up the contribution in the financial plan:
This adjustment reduces Maria’s taxable income from £50,000 to £30,000, mimicking the effect of tax relief being applied at source. The result is a more accurate tax calculation and a better reflection of the true tax advantage of her pension contribution.
This method allows the taxable income to reflect the effect of a Net Pay Arrangement, producing a more accurate tax calculation.
Conclusion
Tax relief is an essential part of modelling pension contributions effectively. While Timeline Planning doesn’t currently apply tax relief automatically, the platform remains flexible—allowing advisers to adjust for this manually. By doing so, you can ensure your plans accurately represent the tax benefits of pension contributions, maintain forecast integrity, and build client confidence in the financial plan.
Let us know if you'd like to be notified when automated tax relief modelling is introduced.