Tax relief - pension contributions
Discussion
I wonder if anyone could advise...
... having changed jobs in the last year and having a 'review' with the company pensions adviser person I've just discovered that I should have been claiming tax relief on my pension contributions for the last six years (as I am a higher rate tax payer). They've offered to do it all for me for a rather high fee... but surely it can't be that tricky? What would I need to do in order to claim the money back?
Grateful for any advice!
Ant
... having changed jobs in the last year and having a 'review' with the company pensions adviser person I've just discovered that I should have been claiming tax relief on my pension contributions for the last six years (as I am a higher rate tax payer). They've offered to do it all for me for a rather high fee... but surely it can't be that tricky? What would I need to do in order to claim the money back?
Grateful for any advice!
Ant
I was in the same position as you. I wrote to the IR, and they said to send them what had been paid and how much tax had been paid on them (my pension provider supplied this free of charge). They sent a cheque back fairly quickly without asking any more questions.
No need to pay anyone to do this for you.
No need to pay anyone to do this for you.
And do it every year from now on.
An alternative could be to get on the Self Assessment bandwagon as there is a chance that you may be UNDERPAYING tax on investment income such as interest received or fovidends received. If you are, you SHOULD be completing Self Assessment tax returns to both declare additional undertaxed or untaxed income as well as claiming additional tax reliefs you might be entitled to.
Do you make donations to charities under Gift Aid by any chance?
An alternative could be to get on the Self Assessment bandwagon as there is a chance that you may be UNDERPAYING tax on investment income such as interest received or fovidends received. If you are, you SHOULD be completing Self Assessment tax returns to both declare additional undertaxed or untaxed income as well as claiming additional tax reliefs you might be entitled to.
Do you make donations to charities under Gift Aid by any chance?
Even if you go down the Salary Sacrifice route, if your Gross Income for the year exceeds the 40% threshold you are STILL entitled to 40% tax relief on your pension copntributions and you can STILL make the claim.
If you Gift Aid, you are also entitled to 40% tax relief on the donations. You also need to make that claim yourself.
If you Gift Aid, you are also entitled to 40% tax relief on the donations. You also need to make that claim yourself.
Eric Mc said:
Even if you go down the Salary Sacrifice route, if your Gross Income for the year exceeds the 40% threshold you are STILL entitled to 40% tax relief on your pension copntributions and you can STILL make the claim.
If you Gift Aid, you are also entitled to 40% tax relief on the donations. You also need to make that claim yourself.
Presumably as the pension is being done via salary sacrifice then the sacrificed element becomes an additional employer contribution so there is no claim to make on a self assessment Tax Return.If you Gift Aid, you are also entitled to 40% tax relief on the donations. You also need to make that claim yourself.
I just write to them every year with details of pension contributions and savings interest. They then work out the difference between what they owe me and I owe them, which results in a nice big cheque in my favour - I haven't had to do a self assessment.
Still seems like a daft way of doing it, you'd think it would all be automated. I guess they must be onto a nice earner with the amount of people who don't know that they need to claim it.
Still seems like a daft way of doing it, you'd think it would all be automated. I guess they must be onto a nice earner with the amount of people who don't know that they need to claim it.
Self Asswssment tax is a typical British "Bugger's Muddle". There are around 30 million taxpayers in the UK. Only around 9 million are expected to complete a tax return. In the US, MOST tax payers complete a return.
I would guess that there could possibly be an additional 2 million people out there who should really be making some sort of tax return.
I would guess that there could possibly be an additional 2 million people out there who should really be making some sort of tax return.
Don't forget that the Government are quietly going to screw you again though (depending on how much you contribute and earn).
Some time ago the cap of 17.5% earnings into a pension fund was removed, which was great news becasue people have tiny pensions and need to contribute more than that at some stages in their life in order to be able to retire.
THEN at the last budget they announced that from this April, they will cap 40% relief to the first 20k for anyone earning something like 130k and only give 20% relief over that. May or may not affect you, but typicla of this Government
Some time ago the cap of 17.5% earnings into a pension fund was removed, which was great news becasue people have tiny pensions and need to contribute more than that at some stages in their life in order to be able to retire.
THEN at the last budget they announced that from this April, they will cap 40% relief to the first 20k for anyone earning something like 130k and only give 20% relief over that. May or may not affect you, but typicla of this Government
Noted.
Your salary is lower than otherwise it would be and therefore you pay less PAYE and NI than you otherwise would. Beacuse you have voluntarilly reduced your salary, the employer also pays less Employer's NI.
Even though your employer is paying your pension for you, because of the special cencessions curently given by HMRC, this is not treated as a taxable Benefit in Kind so you are not taxed on the "Benefit" you are receiving from your employer of having your pension paid by them.
Obviously, the main concern I have is that they have asked you to take a pay cut to free up funds for them to pay your pension for you.
But, that is your decision.
Your salary is lower than otherwise it would be and therefore you pay less PAYE and NI than you otherwise would. Beacuse you have voluntarilly reduced your salary, the employer also pays less Employer's NI.
Even though your employer is paying your pension for you, because of the special cencessions curently given by HMRC, this is not treated as a taxable Benefit in Kind so you are not taxed on the "Benefit" you are receiving from your employer of having your pension paid by them.
Obviously, the main concern I have is that they have asked you to take a pay cut to free up funds for them to pay your pension for you.
But, that is your decision.
Edited by Eric Mc on Tuesday 9th March 16:11
I see your concern but ultimately I would be paying that money into a pension fund anyway so whether it is by salary sacrifice or otherwise I can't see it making a vast difference, other than if I wanted to get a much larger mortgage then the salary multiple would be a bit less.
Right... I suppose I'd better draft a letter and get my tax back.
Right... I suppose I'd better draft a letter and get my tax back.
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