Can I reclaim tax relief on pension contr. as basic rate tax

[CoolHands]

I purchased additional pension in approx feb 17, (I actually applied in dec 16] and I paid for it as a lump sum using my own money. I didn’t claim any tax relief & have never done a self-assessment form. I just thought I’d look into it, & phoned hmrc and they said that as I wasn’t a higher rate tax band, I can’t claim tax relief. I was marginally below the higher-rate threshold apparently by a few hundred pounds.

My basic question is, is that right? Why don’t I get tax relief at 20%?

[bogie]

your pension provider usually claims back the standard basic rate tax relief at source = you should already have it if you check your pension statement

its the higher rate tax relief you claim back via self assessment

[CoolHands]

Hi bogie sorry can you elaborate on what that means? I paid, and never got a refund. But also no extra pension tax relief amount was added to the pension I purchased. So as far as I can see it has not been used to my benefit in either direction?

Edit

I’ve just check and I made the purchase in jan 17. So that is the tax year 16/17 yes? My pay that year as just checked on my gov gateway account was £34k. The higher rate threshold for 16/17 was £32,001 upwards. So therefore I was at that time in the higher rate bracket? So do I need to do a self assessment (is it too late?)

The girl on the phone wasn’t very good and didn’t inspire confidence; she referred to my 17/18 pay which was under the 17/18 higher rate threshold. But I purchased before the 17/18 tax year so I don’t get that.

Edited by CoolHands on Saturday 12th October 09:50

Edited by CoolHands on Saturday 12th October 09:52

[Eric Mc]

If you are a basic rate tax payer only, pension tax relief is paid directly into the pension fund by HMRC.

If you are a higher rate tax payer, then additional tax relief at the higher rate is refunded to you (or used to increase your PAYE tax code so you get the additional relief that way.

[CoolHands]

Sorry Eric can you look at additional info I just edited in above? Not sure about tax years and when this occurred. I was higher one year but basic the next.

[Eric Mc]

CoolHands said:

Sorry Eric can you look at additional info I just edited in above? Not sure about tax years and when this occurred. I was higher one year but basic the next.

In what tax year were you a higher rate tax payer?
Did you make additional pension contributions in that tax year?

[Stay in Bed Instead]

CoolHands said:

Hi bogie sorry can you elaborate on what that means? I paid, and never got a refund. But also no extra pension tax relief amount was added to the pension I purchased. So as far as I can see it has not been used to my benefit in either direction?

Edit

I’ve just check and I made the purchase in jan 17. So that is the tax year 16/17 yes? My pay that year as just checked on my gov gateway account was £34k. The higher rate threshold for 16/17 was £32,001 upwards. So therefore I was at that time in the higher rate bracket? So do I need to do a self assessment (is it too late?)

The girl on the phone wasn’t very good and didn’t inspire confidence; she referred to my 17/18 pay which was under the 17/18 higher rate threshold. But I purchased before the 17/18 tax year so I don’t get that.

Edited by CoolHands on Saturday 12th October 09:50

Edited by CoolHands on Saturday 12th October 09:52

Did you not have any personal allowance for 2016-17?

Personal allowance £11,000
20% band £32,000

If you were only a basic rate tax payer, you pay a net of tax relief contribution and the pension provider will collect the tax relief from HMRC.

£80 net
£20 tax relief reclaimed
£100 total into pension

[CoolHands]

Eric Mc said:

In what tax year were you a higher rate tax payer?
Did you make additional pension contributions in that tax year?

Well according to my gov site info higher rate in 16/17 as from the numbers I earnt above the higher rate threshold for 16/17? And I purchased the addition pension in jan 2017 as a lump sum.

Edited by CoolHands on Saturday 12th October 10:11

[CoolHands]

Ok I just rang them again and what they said is you would add on the tax free allowance to the threshold and only if you earn above that would be a higher rate tax payer and therefore be able to claim tax relief.

So my calculations based on the way it has been explained to me are in 2016/17:

Higher band threshold =£32001
Personal allowance £11,000
32001+11000=43001

If I was earning above £43001 then I would have been a higher rate tax payer(?) but as I wasn’t, I was a basic rate tax payer and therefore cannot claim tax relief.

Doe that read correctly?!

Frankly, I don’t get it

Edited by CoolHands on Saturday 12th October 11:08

[JulianPH]

CoolHands said:

Ok I just rang them again and what they said is you would add on the tax free allowance to the threshold and only if you earn above that would be a higher rate tax payer and therefore be able to claim tax relief.

So my calculations based on the way it has been explained to me are in 2016/17:

Higher band threshold =£32001
Personal allowance £11,000
32001+11000=43001

If I was earning above £43001 then I would have been a higher rate tax payer(?) but as I wasn’t, I was a basic rate tax payer and therefore cannot claim tax relief.

Doe that read correctly?!

Frankly, I don’t get it

Edited by CoolHands on Saturday 12th October 11:08

As you were not a higher rate taxpayer you obviously cannot reclaim any higher rate tax relief.

However, this has no impact whatsoever on your pension provider being able to reclaim any basic rate tax relief due on your contribution.

[CoolHands]

Ok thick question time. Was I or was I not a higher rate tax payer that year? As I was earning £34k which is above the threshold of that year of £32k?

By these if anyone can help it also says in part of the pension scheme documentation

“Can I claim Tax Relief on the additional contributions I pay?
You’ll normally receive tax relief through the PAYE system if you pay by instalments. You’ll need to speak to the tax office about tax relief if you make a lump sum payment.”

So I still don’t think I’ve got tax relief of even the 20% amount? I paid £10,000 and that purchased some additional pension, but I think I’m somehow missing out on pension relief be it even at 20% level??

Edited by CoolHands on Saturday 12th October 11:39

[anonymous-user]

Think of it as a cake arranged with two horizontal layers.

The bottom layer is £11,000 thick and is not taxed at all.
The top layer is £32,000 thick and is taxed at 20%

The whole cake is £43,000 thick but none of it is taxed above 20%

Your £34k cake is less than £43k thick so none of your cake is taxed above 20%

Edited by anonymous-user on Saturday 12th October 11:40

[JulianPH]

CoolHands said:

Ok thick question time. Was I or was I not a higher rate tax payer that year? As I was earning £34k which is above the threshold of that year of £32k?

No, you were not. You are not adding the personal allowance to that figure. Higher rate tax is only payable on money earned over and above the combination of the personal allowance and the basic rate band.

[CoolHands]

Ok thanks both I understand now about higher rate.

Without being a real drag, has the relief at 20% been used anywhere? Sorry for thicko questions.

[JulianPH]

CoolHands said:

Ok thanks both I understand now about higher rate.

Without being a real drag, has the relief at 20% been used anywhere? Sorry for thicko questions.

Your pension provider should have reclaimed the basic rate of tax at source directly from HMRC.

This should have been added to your contribution. If it has not been your pension provider hasn't got a leg to stand on.

[JulianPH]

Any joy finding out what your pension provider did regarding the basic rate tax relief?

[dingg]

My q on pilon is quite similar

Ie I'm due say 25k gross does a 20k payment into my pension come off the 25k before tax is deducted just leaving 5k taxable?

Tia

[Eric Mc]

JulianPH said:

CoolHands said:

Ok thanks both I understand now about higher rate.

Without being a real drag, has the relief at 20% been used anywhere? Sorry for thicko questions.

Your pension provider should have reclaimed the basic rate of tax at source directly from HMRC.

This should have been added to your contribution. If it has not been your pension provider hasn't got a leg to stand on.

That is the fundamental rock on which the UK pension system tax relief actually works. The taxpayer does not personally see the tax relief they are getting at 20%. However, the theory is that the pension fund is growing more rapidly because HMRC are lobbing the 20% tax relief directly into your pension pot on your behalf.

[JulianPH]

dingg said:

My q on pilon is quite similar

Ie I'm due say 25k gross does a 20k payment into my pension come off the 25k before tax is deducted just leaving 5k taxable?

Tia

Sorry, I missed that thread!

Just had a look and Steve was spot on, but it seems like that won't work for you. It may still be worth you going back to them and pointing out the large employer NI saving they would benefit from and that you are happy to sign an agreement to not pursue them for unfair dismissal.

It might not get you anywhere, but it would be my first move at this stage.

If you have the earnings and already have any form of pension (State Pension excluded) in place there is nothing stopping you from putting this payment into your pension to avoid any tax.

If you don't, then you can request they make this payment as a gross pension contribution rather than a net personal payment.

If you would like to chat through this please give me a PM. Alternatively contact Nik on the IM sticky and he can do this and also represent your position (and the tax advantages available to them) with your employer. This should add some weight to your position.

[JulianPH]

Eric Mc said:

JulianPH said:

CoolHands said:

Ok thanks both I understand now about higher rate.

Without being a real drag, has the relief at 20% been used anywhere? Sorry for thicko questions.

Your pension provider should have reclaimed the basic rate of tax at source directly from HMRC.

This should have been added to your contribution. If it has not been your pension provider hasn't got a leg to stand on.

That is the fundamental rock on which the UK pension system tax relief actually works. The taxpayer does not personally see the tax relief they are getting at 20%. However, the theory is that the pension fund is growing more rapidly because HMRC are lobbing the 20% tax relief directly into your pension pot on your behalf.

100% as always mate!