How easy to claim 20% refund for personal pension?

Woodstock88 · 15 March 2018 at 10:31PM

My taxable income this year is £45,086.

I did a lot of calculation, sacrifice my bonus and salary for pension to make sure my taxable income is below £45k, but due to an unexpected benefit allowance, pushed my taxable income more than £45k unfortunately.

I hate this because I will be paying total of 52% of highest tax rate and NI rate :mad::mad:. This happens due to some of the benefits and allowances are taxable, but not NIable, this gives the tax rate and NI rate chart as below.

0% for £0-£8,164
12% for £8,164-£11,500
32% for £11,500-£45,000
52% for £45,000-£45,100
42% for £45,100-£100,000

I was not allowed to post image

the link is as below (remove *)
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In other words, for the additional £86 I was paid, I receive only £41 only (because reduction of 52% of tax and NI)

I can make additional £100 contribution to my pension, I should automatically get 20% 'Relief at source'. To claim the additional 20% for the higher tax rate, I will have to do "Self Assessment tax return".

a) But because this is only one off incident, I strongly believe I will not make the same mistake next year, how could I request for refund without doing "Self Assessment tax return"?

b) In your opinion, do it worth the trouble for this additional £86 extra...?

Woodstock88 · 15 March 2018 at 10:33PM

0% for £0-£8,164
12% for £8,164-£11,500
32% for £11,500-£45,000
52% for £45,000-£45,100
42% for £45,100-£100,000

Dazed_and_confused · 16 March 2018 at 12:28AM

You do not have to do a Self Assessment return just to claim relief on a small personal pension payment.

But you won't be getting £86 back.

If you pay £100 then £25 relief at source is added to your pension fund so you have a gross contribution of £125. This increases the amount of basic rate tax you can pay by £125.

So in your example instead of paying £86 at 40% you will pay 20% tax on this £86 which is a tax saving of £17.20. Most people on PAYE underpay tax by a couple of pounds each year due to a quirk in how tax codes work so if you were to make a claim from HMRC you would most likely get a tax refund of £15.

So you end up with £125 in your pension but overall it has only cost you £85.

Note all of the above assumes your taxable income is entirely wages, employment benefits etc. If it includes savings interest or dividends then the refund would be less, possibly nothing at all as some of your income would be taxed at 0% so no higher rate tax relief might be due as you may not have paid any despite having income of £45,086.

How easy to claim 20% refund for personal pension?

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