Advice needed

StinkyMonkey

Hello,

My employer pays into a personal pension on my behalf under a salary sacrifice arrangement. I am under the impression that I can add to my pension pot separately (for instance, if I had some extra money in my pocket at the end of the month, I could add it to my pot on top of what comes directly from the employer's direct debit).

Could someone please explain what are the tax implications of such private contributions? For instance, the salary sacrifice ensures that the tax that I would normally pay for the extra salary goes into the pension pot. Will I get a similar 'tax rebate' for any additional contribution I make myself? If yes, how is this done?

Many thanks,

SM

yelf

yes - the amount you put in will be the net amount, and so will be grossed up by 20%. so if you add £80 the pension provider reclaims £20 from HMRC

StinkyMonkey

yelf wrote: »

yes - the amount you put in will be the net amount, and so will be grossed up by 20%. so if you add £80 the pension provider reclaims £20 from HMRC

Thanks for the quick response. Do you know if this happens immediately or, say, at the end of the financial year?

Also, if I am correct, the tax relief is different for basic and higher tax-payers. How will the provider know how much to tax claim? I guess the HMRC will tell them...or not?

jem16

StinkyMonkey wrote: »

Thanks for the quick response. Do you know if this happens immediately or, say, at the end of the financial year?

It happens immediately.

Also, if I am correct, the tax relief is different for basic and higher tax-payers. How will the provider know how much to tax claim? I guess the HMRC will tell them...or not?

The provider only claims the basic rate of tax. If you are a higher rate taxpayer you have to claim the extra 20% via your tax return.

StinkyMonkey

Thanks for this info. I have no clue about tax returns. Is this something all higher rate tax-payers have to fill in? Will the HMRC ask me to fill one in or I need to know myself whether I need to fill one in?

jem16

A tax return for higher rate taxpayers is not always necessary - it depends on circumstances. If HMRC send one you must fill it in.

Basically if you are a higher rate taxpayer and you have savinngs income that needs to have more tax taken off than the standard 20% taken off by banks or you are making pension contributions and need to claim extra tax relief then you should contact HMRC as it is your responsibility.