Tax relief pension payments; higher rate of tax
Discussion
My pension arrangements have changed since Feb 2019 when I changed jobs.
For 5 years between 2013 to 2018 my employer paid into my pension pot with zero contributions from my side.
Now I pay in 8% monthly into a final salary (defined benefit) scheme.
I have also decided to continue to pay monthly into the scheme my previous employer paid into between 2013 to 2018. I pay £800 monthly with £200 Tax relief.
As a higher rate tax payer, I believe I can claim more tax relief through self-assessment.
Can I work out how much annually this will amount to?
I have always been salaried and hence not done a self-assesment. With respect to this pension issue, when is most appropriate time to do this?
For 5 years between 2013 to 2018 my employer paid into my pension pot with zero contributions from my side.
Now I pay in 8% monthly into a final salary (defined benefit) scheme.
I have also decided to continue to pay monthly into the scheme my previous employer paid into between 2013 to 2018. I pay £800 monthly with £200 Tax relief.
As a higher rate tax payer, I believe I can claim more tax relief through self-assessment.
Can I work out how much annually this will amount to?
I have always been salaried and hence not done a self-assesment. With respect to this pension issue, when is most appropriate time to do this?
I am not a finance/accounting expert, however if 20% relief is worth £200pcm, then my skills tell me that 40% relief would be £400pcm.
Assuming you’re not hitting any pension limits (lifetime/annual), your refund will be the same as your automatic top-up, except it’ll be received by you as cash.
I suspect you could talk to the IR and get a new tax code reflecting your contributions (and in turn reduce your PAYE deductions) but if cash flow isn’t an issue, I’d wager it’ll be easiest if you just wait until filing season next spring and send in your self-assessment.
Assuming you’re not hitting any pension limits (lifetime/annual), your refund will be the same as your automatic top-up, except it’ll be received by you as cash.
I suspect you could talk to the IR and get a new tax code reflecting your contributions (and in turn reduce your PAYE deductions) but if cash flow isn’t an issue, I’d wager it’ll be easiest if you just wait until filing season next spring and send in your self-assessment.
Edited by Testaburger on Sunday 7th July 04:40
Assuming your DB contributions are paid gross and all of your £1,000 a month DC payments come from higher rate earnings then you can claim back the same figure in higher rate tax relief as your pension provider received in basic rate reclaims (so £2,400 a year in your example).
Higher rate tax payers do not need to file a self assessment form to reclaim back the higher rate tax relief, you can simple call or write to HMRC.
It is only if you pay any tax at the highest rate (45%) that you are required to submit a self assessment form.
Higher rate tax payers do not need to file a self assessment form to reclaim back the higher rate tax relief, you can simple call or write to HMRC.
It is only if you pay any tax at the highest rate (45%) that you are required to submit a self assessment form.
chrishumes1978 said:
Julian, an i right in thinking if I am PAYE, then it comes off the top line so hence its invested without tax anyway? Or can i claim addition relief?
Hi Chris, it varies from company to company but we see the norm is for the employer contribution to be made gross and the employee contribution to be made net (and we run 5,000 such schemes aside from our individual clients that is a good sample size for me to base this on).If your scheme is set up this way then yes, you can claim additional tax relief.
You should be able to check this easily with your employer and/or pension provider.
Why all companies don't make full gross occupation pension contributions is beyond me as it would save everyone a lot of time. I understand this has a slight impact on workers whose earnings are beneath the income tax level (a £1.22 maximum reduction in weekly take home pay), but it is far better for everyone else.
When you are checking, just be aware that in its infinite wisdom the government has decide to call the method by which your contribution is paid gross the "Net Pay Arrangement"!!!
You couldn't make it up!
mikees said:
Good point in general, but unlikely to be a factor with workplace pension contributions due to the upper level qualifying earnings cap of £50,000.Gassing Station | Finance | Top of Page | What's New | My Stuff