Self Assessment, pensions, salary sacrifice... CONFUSED!!

[Kermit power]

Morning all!

This year is my first full tax year suffering the horrors of my employer using NEST for our work pensions, and just to make matters somewhat more complicated, I'll also have a couple of months of salary sacrifice deductions for an EV lease, which also adds in BIK, even though I'm paying the lease cost myself.

To make matters even more complicated I can never predict how much I'm going to earn in any given tax year before month 11, as a significant proportion of my income is from commission and bonuses, but on average, it's going to sit within a bracket which means that the salary sacrifice on both the pension and EV will impact the extent to which I lose my personal tax allowance.

Looking at my latest payslip, the EV payments do reduce my taxable income, so I'm assuming that'll get taken into account automatically, but the pension payments don't, although I am getting the 20% basic rate relief paid into the pension. Assuming this is the case, if my total employee pension contributions this year come out at £10k and I end the year with a gross taxable salary of £123k, am I right in thinking I'm due a tax rebate as follows?

1. Higher rate relief @20% on the £10k = £2k

2. Restoration of £5k to my personal tax allowance because the full £10k pension contribution falls in the £100-125k bracket = another £2k refund, as not only will my threshold for basic rate tax increase, but so will the point at which I start paying higher rate tax?

Needless to say, a £4k lump sum isn't to be sniffed at in any way, shape or form, but should I be able to get HMRC to alter my tax code to reflect at least a proportion of it as I go through the year? I'd much rather stuff it into an ISA that can earn interest going through the year then take it out to pay a tax bill if I've underpaid than what I'm currently doing, which is effectively saving with HMRC at 0% interest!

[MustangGT]

Pension payments to NEST are normally net. For example, if you are personally contributing 5% of salary, the deduction from your pay will be 4% with the other 1% being added by the Government direct to NEST. At your salary level the values will likely be slightly different, but overall the same mechanism should be in use.

[Kermit power]

MustangGT said:

Pension payments to NEST are normally net. For example, if you are personally contributing 5% of salary, the deduction from your pay will be 4% with the other 1% being added by the Government direct to NEST. At your salary level the values will likely be slightly different, but overall the same mechanism should be in use.

You'd like to think so, but annoyingly they're only ever net of the 20% basic rate relief. From what I've been able to gather so far, if my salary and pension contributions were fixed, or even if there was no realistic probability that I'd move outside just the standard higher rate tax bracket I could get my tax code adjusted, but seemingly it's considered too difficult in this scenario!

[MustangGT]

Kermit power said:

MustangGT said:

Pension payments to NEST are normally net. For example, if you are personally contributing 5% of salary, the deduction from your pay will be 4% with the other 1% being added by the Government direct to NEST. At your salary level the values will likely be slightly different, but overall the same mechanism should be in use.

You'd like to think so, but annoyingly they're only ever net of the 20% basic rate relief. From what I've been able to gather so far, if my salary and pension contributions were fixed, or even if there was no realistic probability that I'd move outside just the standard higher rate tax bracket I could get my tax code adjusted, but seemingly it's considered too difficult in this scenario!

It is correct that the government contribution is always at 20%. As a higher rate tax payer you need to claim the rest through your annual tax return.

[Kermit power]

MustangGT said:

Kermit power said:

MustangGT said:

Pension payments to NEST are normally net. For example, if you are personally contributing 5% of salary, the deduction from your pay will be 4% with the other 1% being added by the Government direct to NEST. At your salary level the values will likely be slightly different, but overall the same mechanism should be in use.

You'd like to think so, but annoyingly they're only ever net of the 20% basic rate relief. From what I've been able to gather so far, if my salary and pension contributions were fixed, or even if there was no realistic probability that I'd move outside just the standard higher rate tax bracket I could get my tax code adjusted, but seemingly it's considered too difficult in this scenario!

It is correct that the government contribution is always at 20%. As a higher rate tax payer you need to claim the rest through your annual tax return.

That seems to be the only option. Pretty bloody annoying though! I know I'm paying too much tax through the year, and the taxman knows I'm paying too much through the year, so in effect I'm having to give the government an interest free loan every year on top of all they take from me on tax!