Higher rate pension relief

Ethelman

I've spent a while digging round the forum and looking for answers but cannot see the answer to this - sorry if it's already well known.

I'm a higher rate tax payer and paid a chunk into my pension this year. My tax return calculation- I've only prepared it, not filed it- adds my grossed-up (ie money paid out of pocket times 100 divide by 80) amount to my basic rate band.

I had expected my taxable pay to be my actual pay minus my pension payments, then- after deduction of personal allowance- for that to be taxed at basic rate up to threshold, followed by the rest at 40 per cent.

This calculation would leave me better off than the Revenue's sums.

Thanks for whoever can put me right.

CLAPTON

well, you have already received 20% of the tax back as your actual payment has been increased by 25% in your pension fund (i.e. 80 actual pay becomes 100 in your pension fund) so you are only due a tax refund of the remainer 20%. This is achieved by increasing your 20% band by the grossed up amount


if they had deducted the grossed up amount from your income then get 40% refund in your tax reduction plus the grossed up 20% in your pension fund

Ethelman

CLAPTON wrote: »

well, you have already received 20% of the tax back as your actual payment has been increased by 25% in your pension fund (i.e. 80 actual pay becomes 100 in your pension fund) so you are only due a tax refund of the remainer 20%. This is achieved by increasing your 20% band by the grossed up amount


if they had deducted the grossed up amount from your income then get 40% refund in your tax reduction plus the grossed up 20% in your pension fund

Thanks - I see that logic.

The calculation they've done still doesn't work out to be the same as mine (which comes at it from first principles. I've now put the tax already refunded in to the figures). Interestingly mine is within a couple of pounds of all of the tax calculation programs I've tried (4 of them) whereas the Revenue's is £5k different.

Ho hum!

CLAPTON

Essentially I'm just guessing but if you want to post up the figures maybe we could see at little more clearly