More Than One Pension Fund
Discussion
Can I ask my well informed forum members a question. Assuming that someone had more than one job, and contributed from both jobs into two (or more) pension funds directly from their salary. How would HMRC monitor those contributions to ensure that the annual allowance wasn't exceeded?
e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
Edited by WhiskyDisco on Friday 10th March 09:52
Edited by WhiskyDisco on Friday 10th March 09:52
WhiskyDisco said:
Can I ask my well informed forum members a question. Assuming that someone had more than one job, and contributed from both jobs into two (or more) pension funds directly from their salary. How would HMRC monitor those contributions to ensure that the annual allowance wasn't exceeded?
e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
Paying more than £40,000 in one tax year does not in itself necessarily generate an excess contribution tax charge. There is the facility to carry forward unused allowances from the previous three years.e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
Assuming there is no carry forward though, if part or all was employer contributions HMRC have no way of checking and they rely on the individual to declare it. However, if one pension arrangement receives more than the annual allowance they need to report this to HMRC, and that report is supposed to confirm the total of all pension contributions to all pension arrangements.
Rufus Stone said:
WhiskyDisco said:
Can I ask my well informed forum members a question. Assuming that someone had more than one job, and contributed from both jobs into two (or more) pension funds directly from their salary. How would HMRC monitor those contributions to ensure that the annual allowance wasn't exceeded?
e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
Paying more than £40,000 in one tax year does not in itself necessarily generate an excess contribution tax charge. There is the facility to carry forward unused allowances from the previous three years.e.g.
Job 1 pays £40k into a pension
Job 2 pays £10k into a pension
Total contribution = £50k (more than £40k allowance)
The employee might do this to avoid the tax trap, or the pension might be a perk of the job.
The employee wouldn't need to declare the pension contribution on a tax return, because there would be no tax rebate to claim, as it's "sacrificed" from gross.
How would HMRC know to tax that employee at 55% on the excess paid into pension?
Once you are in that tax system HMRC seem to know " everything " at some point !
Not Pension related but a few years my wife submitted her SA with everything on the Savings part based on what each bank had sent as a tax cert - couple of years later they wrote to her saying she owed x - turns out Nat West had made an error on a fixed rate bond certificate which we didn't realize when submitting.
Not Pension related but a few years my wife submitted her SA with everything on the Savings part based on what each bank had sent as a tax cert - couple of years later they wrote to her saying she owed x - turns out Nat West had made an error on a fixed rate bond certificate which we didn't realize when submitting.
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