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Understanding Pension Contribution Tax Treatment in Timeline Planning | Timeline Help Centre

Summary

  • When creating a contribution from Employed Income or Self-Employed Income to an Uncrystallised Fund or Flexi-Access Drawdown, Timeline automatically treats this as a salary sacrifice arrangement.

  • The contribution is deducted before tax, reducing taxable income in the plan.

  • Tax calculations are automatically updated to reflect the reduced gross salary.

Description

When you select Employed Income or Self-Employed Income as the contribution source and choose a pension account type (either Uncrystallised or Flexi-Access Drawdown) as the destination, Timeline automatically applies salary sacrifice rules.

Under this treatment:

  • The pension contribution is deducted from gross income.

  • Income tax is calculated on the remaining amount after the contribution is removed.

A context-aware message appears below the Contribution source field to make this clear:

Pension contributions are deducted from gross salary under a salary sacrifice arrangement.

This ensures transparency and helps advisers understand how tax is being calculated within the plan.

It also means that no additional manual tax adjustments are required — the software automatically models the tax efficiency of salary sacrifice contributions.

Example

Suppose a client earns £3,000 per month and contributes 5% (£150) to their pension.

  • The £150 contribution is deducted before tax.

  • Tax is applied only to £2,850.

This reduces the client’s taxable income and accurately reflects the tax advantage of salary sacrifice within the cashflow model.

Conclusion

The salary sacrifice rule applies only when contributions are made from earned income (Employed or Self-Employed) into a pension account, such as:

  • Uncrystallised Funds

  • Flexi-Access Drawdown

Timeline automatically adjusts taxable income and tax calculations to reflect the reduced gross salary. This ensures financial plans correctly model the benefits of salary sacrifice pension contributions, without requiring additional manual configuration.