Pension Tax Relief : Higher rate taxpayers

CompostBin

Morning all, long time reader, first time poster.

I have an issue where I feel I may be losing out on tax relief on my stakeholder pension and was wondering if anyone could shed some light please.

My situation is that I earn £30k basic salary, but with overtime this often pushes me up to the £35k-£37k bracket, thus taking me into the higher tax band by a few thousand pound.

I contribute to a pension (5% of salary) which my employer also contributes a fixed percentage of 1.5%. As it stands, after consulting the company accountant when I asked him this same question, he says I wouldn't be legible for the extra tax relief as my basic salary was below the £34,800 tax limit band. Can anyone confirm or deny this please?

Also, if I am allowed the additional tax relief, would I be able to claim tax relief on every penny I've paid into the pension or would it be some arbitrary amount linked to being ever so slightly in the higher tax band?

Many thanks :beer:

MikeJones_2

Hi CompostBin,

This article might help as there's a simple example of how pension tax relief is granted for higher rate taxpayers on post-tax income (albeit on a slightly higher salary than you are currently on).

See:
Earning around £45k? Pension contributions could be cheaper now than next year (Watson Wyatt)

Alternatively, see this:
Tax relief on pension contributions (DirectGov)

If you're still confused after reading it, post again.

Hope that helps. (Great 'alias', by the way).

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

jem16

CompostBin wrote: »

My situation is that I earn £30k basic salary, but with overtime this often pushes me up to the £35k-£37k bracket, thus taking me into the higher tax band by a few thousand pound.

You are not a higher rate taxpayer even with the overtime.

You need to be earning £40,835 before being liable for higher rate tax. This is £34,800 taxable income plus £6035 (normal personal allowance)

Also, if I am allowed the additional tax relief, would I be able to claim tax relief on every penny I've paid into the pension or would it be some arbitrary amount linked to being ever so slightly in the higher tax band?

You can only claim the extra tax relief on the amount you are in the higher tax bracket by.

MrMicawber_2

Also..........................your overtime might well not be pensionable income just as most bonuses are not pensionable income.

CompostBin

Thank you all for your replies, the replies clear up for me what I needed to know which my company accountant didn't.

Thank you all, have a Merry Christmas