Pension Tax Relief at 40%

lkalka

I'm looking for a little advice on possible claiming back some Tax for the last few years because I've only just realised I was into the 40% tax bracket and can claim relief on my pension payments at 40%.

NB This is a personal pension so I've not been getting the tax relief in my actual wage.

So for example if someone earned 39k in 04-05 with a tax code of 295L I believe anything earned over £34,350 (31,400 + 2950) would be at 40% (about 5k), is that correct?

If so, lets say pension payments that year were made of £2k would you be able to claim 18% (difference betwen the 2 tax rates) of that i.e.£360.

2 questions:-
Is that how it works and also am I right in thinking you can go back to 04-05 with a claim?

Thanks for any help.

bogeysmum

To be on the safe side, your very best bet would be to write to your local tax office with all the information and be guided by them.

lkalka

bogeysmum wrote: »

To be on the safe side, your very best bet would be to write to your local tax office with all the information and be guided by them.

I am going to but I like to know the answers before I ask the questions

I'm hoping someone on here may be able to help

jem16

lkalka wrote: »

So for example if someone earned 39k in 04-05 with a tax code of 295L I believe anything earned over £34,350 (31,400 + 2950) would be at 40% (about 5k), is that correct?

Yes that's correct.

If so, lets say pension payments that year were made of £2k would you be able to claim 18% (difference betwen the 2 tax rates) of that i.e.£360.

If the £2k is the gross amount then yes. However I suspect the £2k is the net amount that you actually paid so the gross amount would be £2564 and 18% tax relief would be £461.53.

2 questions:-
Is that how it works and also am I right in thinking you can go back to 04-05 with a claim?

Thanks for any help.

Yes it's how it works and I believe you can go back 6 years to claim.

lkalka

jem16 wrote: »

Yes that's correct.

If the £2k is the gross amount then yes. However I suspect the £2k is the net amount that you actually paid so the gross amount would be £2564 and 18% tax relief would be £461.53.

Yes it's how it works and I believe you can go back 6 years to claim.

You are correct on the gross/net payments.

Thanks for a great reply, I'm off down to the tax office next week.

usedandabused

anti-forestalling legislation, and the eventual tapering off 40% to 20% pension relief, some people will be spitting blood, but for the rest of us mere mortals on a modest wage, we'll be alright lol

Debt_Free_Chick

usedandabused wrote: »

anti-forestalling legislation, and the eventual tapering off 40% to 20% pension relief, some people will be spitting blood, but for the rest of us mere mortals on a modest wage, we'll be alright lol

Anti-forestalling only applies to those who change their "normal pattern of contributions" AND if their pre-tax income is over £130k.

Those with pre-tax income over £130k will have to do a check to see if their "relevant income" is over £150k. If it is - and they change their normal pattern of contributions, then they can expect to see the tax relief restricted, on (at least) some of the (extra) contributions they pay now.

From April 2011, if your pre-tax income exceeds £130k and your relevant income is over £150k, then your tax relief will be limited. Note that you need to include employer's contributions and you may well be taxed on some or all of the contributions that your employer pays.

Clear? Nope - the regulations are dreadfully complicated!

usedandabused

Debt_Free_Chick wrote: »

Anti-forestalling only applies to those who change their "normal pattern of contributions" AND if their pre-tax income is over £130k.

Those with pre-tax income over £130k will have to do a check to see if their "relevant income" is over £150k. If it is - and they change their normal pattern of contributions, then they can expect to see the tax relief restricted, on (at least) some of the (extra) contributions they pay now.

From April 2011, if your pre-tax income exceeds £130k and your relevant income is over £150k, then your tax relief will be limited. Note that you need to include employer's contributions and you may well be taxed on some or all of the contributions that your employer pays.

Clear? Nope - the regulations are dreadfully complicated!

Hehe, you've a tax brain the size of europe

I just read about the new rules and wanted to sound clever, i should really give it up shouldn't I?

i barely earn over the personal allowance, so the rules don't really effect a little old destitute like myself :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

lkalka

I'm presuming the last 2 posts don't effect me as I'm only just into the 40% bracket , in fact I'm not in it at all now but I was in 02 to 08.

Another question

Lets say I was only £1500 into the 40% bracket and I paid 2k into a pension what would the exact calculation be for the refund for that year?

The only downer in this is I've missed claiming 02/03 and 03/04

usedandabused

lkalka wrote: »

I'm presuming the last 2 posts don't effect me as I'm only just into the 40% bracket , in fact I'm not in it at all now but I was in 02 to 08.

Another question

Lets say I was only £1500 into the 40% bracket and I paid 2k into a pension what would the exact calculation be for the refund for that year?

The only downer in this is I've missed claiming 02/03 and 03/04

don't quote me but you do realise you only get an additional 20% relief as you automatically get relief at 20% at source so don't expect the refund to be 40%, do you have to submit a tax return?

because if you do they gross up your total pension contribution and extend your basic rate tax band by the pension or even gist aid amount, so you get the additional 20% relief.

but then again, don't listen to me

lkalka

Yes I realise the claim will be for 18% for the years in question because the basic rate was 22%.

No I havent been submitting a tax return because the tax office said I didn't need to anymore because it was always roughly the same each year.

PS the first 20% is not source because it's a personal pension (so it goes direct into my pension).