NHS additional pension and tax relief on lump sum

butterfly72

I'm buying £500 of additional NHS pension by installments. On top of that I've just bought a further £500 by lump sum. I paid by cheque. The nhs pension site says:

Q. Will I get tax relief on my AP contributions?

A. We cannot advise you about your personal tax position but members of a registered pension scheme, like the NHS Pension Scheme, can normally contribute up to 100% of their salary and claim tax relief.

When paying for AP by instalments tax relief is usually received through the PAYE system. If you pay by lump sum you will need to contact your local tax office or complete a self assessment tax return to claim the tax back.


I rang the tax office yesterday.. as suggested and the women I spoke to said that only higher rate tax payers would get tax relief at 20% (I'm basic rate). To be honest, I'm not really sure what tax relief is. Does it mean that you don't pay tax on the amount going into the pension? Is the women at the tax office correct to say its only for higher rate tax payers?

thanks

jem16

butterfly72 wrote: »

Does it mean that you don't pay tax on the amount going into the pension?

Pensions attract tax relief at the rate you pay tax. Normally when you pay into your NHS pension it is paid from your gross wages before you are taxed. So a £100 payment will only see your net salary reduced by £80.

If you paid your Additional Pension in monthly instalments it would attract the same tax relief. However you have paid by cheque from your net pay and have not received that 20% tax relief.

Is the women at the tax office correct to say its only for higher rate tax payers?

thanks

In this case no I don't think she is correct but it may have been the way you described it to her. Normally only higher rate taxpayers would need to claim as anyone paying net into a money purchase scheme has the 20% basic rate tax relief automatically paid into the pension. However you are paying for £500 worth of final salary pension so it won't be getting that tax relief.

Phone HMRC back and explain that you are buying Additional Pension in a final salary scheme and want to claim the 20% basic rate tax relief.

EDIT - just found this from HMRC website which answers your question.

http://www.hmrc.gov.uk/pensionschemes/faqs/taxrel.htm

It's the first question under Public Sector Schemes.

Goldenyears

In my experience of claiming relief from purchasing additional pension by lump sum the self-assessment can be in the form of a letter - but it should ideally contain the following:

1) The receipt from your pension administrator ie. the letter that says thanks for your cheque;
2) Your total income/tax deducted from salary and savings interest etc. tabulated for 2009/10 and 2010/11;
3) probably your P60 for 2010/11 in case HMRC haven't received their copy from your payroll yet.

Edit: just seen Jem16's edit. When I claimed relief I just sent the administrator's receipt as the FAQ says (never saw it at the time). HMRC said thanks but please supply 2) and 3).

butterfly72

jem16 wrote: »

In this case no I don't think she is correct but it may have been the way you described it to her.

It probably was! I must have confused her as I was asking her if it was my AP installments which had caused my tax code to change.. then I asked about the lump sum.

(Turns out I'm paying extra tax for the privledge of using my own car to visit patients and going over the 40p per mile expense. (any over and above is classed as a benefit). The joke is I only get 36.9p per mile and £52 a month regular user which doesn't really cover petrol and tyres! Sorry irrelevant rant over, but nice to know I'm doing my bit for the big society).




thanks Jem16 and golden years.

gadgetmind

If this is anything like lump sum payments into normal private pensions, then the pensions company will automatically claim back 20% of any sums paid in from net pay. Higher rate tax payers can then usually (unless they fall foul of the evil new caps) claim back the additional 20% of tax that this money attracted on its way to their bottom line.

So, for every £1 you pay, £1.25 goes into your pension, the extra being the tax that was taken from you in the first place.

jem16

gadgetmind wrote: »

If this is anything like lump sum payments into normal private pensions,

It's nothing like it.

It's buying an Additional amount of pension in a final salary scheme. It used to be buying Additional years until they withdrew it and replaced it with Additional pension.

Nosht

Beware, my aunt had an enhanced NHS Pension then found out that she could not claim Council Tax Rebate or Pension Credit as she had too much income !!!!!!!

N.

dunstonh

Nosht wrote: »

Beware, my aunt had an enhanced NHS Pension then found out that she could not claim Council Tax Rebate or Pension Credit as she had too much income !!!!!!!

N.

That's a good thing isnt it?

I would have thought that you say beware if you don't put enough towards retirement and instead have to end up living in poverty instead for 20-30 years.

tirednurse_2

Nosht wrote: »

Beware, my aunt had an enhanced NHS Pension then found out that she could not claim Council Tax Rebate or Pension Credit as she had too much income !!!!!!!

N.

I am hoping that will be the case when I retire.....I hate the thought of having so little income that I have to have benefits paid for by other people.