Question about 40% Taxation re Pensions

blisteringblue

Paul_Herring wrote:

Not for a personal pension - the money going in has had tax deducted.

Once it hits the pot, the pension fund company reclaim basic rate tax for you - you have to claim the difference between the basic rate and your marginal rate from the taxman.

I'm confused then! My Pension Plan statement show my payments of 8% of my gross monthly salary as my monthly investment matched by the same from my employer?

However the deduction on my wageslip only show the 8% investment minus the basic rate of tax.

Where is this tax deducted from the pot then? I just thought I was getting tax relief on my investment?

blisteringblue

Ah got it !! Was having a thick moment !!

The tax has already been deducted from my gross salary BEFORE the pension payment is made !! Whereas for my old company scheme the payment was made before income tax was taken off.

Hence TAX RELIEF on the new payments !!

Sorry for any confusion !!

Sulumar

Ok, so I have a personal pension, it's a stakeholder. I put in, say £300, the basic rate is reclaimed and put into the pot so there's ca 380 or so each month in the plan. That much I can see on the paperwork.

But since I'm now a high rate taxpayer, I can claim the rebate which I'll receive as a change in tax code (or potentially a cheque I suppose)? Either way, I can put the extra cash back into the stakeholder and obtain basic tax relief on that?

Paul_Herring

Ok, so I have a personal pension, it's a stakeholder. I put in, say £300, the basic rate is reclaimed and put into the pot so there's ca 380 or so each month in the plan. That much I can see on the paperwork.

300/0.78-300 = 84.65

But since I'm now a high rate taxpayer, I can claim the rebate which I'll receive as a change in tax code (or potentially a cheque I suppose)?

If you're doing Self Assessment, you have the choice when filling it out.
[/quote]Either way, I can put the extra cash back into the stakeholder and obtain basic tax relief on that?[/quote] If you do it before the year's finished, and the contribution doesn't take your marginal tax rate below 40%, you'll be able to claim both basic and higher. In fact the same will apply next year.

Paul_Herring

Ok, so I have a personal pension, it's a stakeholder. I put in, say £300, the basic rate is reclaimed and put into the pot so there's ca 380 or so each month in the plan. That much I can see on the paperwork.

300/0.78-300 = 84.65

But since I'm now a high rate taxpayer, I can claim the rebate which I'll receive as a change in tax code (or potentially a cheque I suppose)?

If you're doing Self Assessment, you have the choice when filling it out.

Either way, I can put the extra cash back into the stakeholder and obtain basic tax relief on that?

If you do it before the year's finished, and the contribution doesn't take your marginal tax rate below 40%, you'll be able to claim both basic and higher. In fact the same will apply next year.

purch

Everyone who is a 40% Tax Payer should fill out a Tax Return every year.

Personally I believe EVERYONE should complete one.....no matter what their earnings.

Mikeyorks

purch wrote:

Everyone who is a 40% Tax Payer should fill out a Tax Return every year..

That hasn't been the case since revised guidelines were published in April 2004 :-

http://www.hmrc.gov.uk/sa/guidelines-sa-returns.htm

purch wrote:

Personally I believe EVERYONE should complete one.....no matter what their earnings.

... it's an opinion, I suppose - but that few would support. Including HMRC, where the revised measures in 2004 were part of a package designed to cut down the unnecessary issue / completion / processing of SA Returns where people had reasonably simplistic tax affairs.

purch

That hasn't been the case since revised guidelines were published in April 2004 :-

SHOULD not MUST !!!

It would help if HMRC could get the PAYE system to actually deduct the correct amount of Income Tax from someone with

simplistic tax affairs

And also maybe it would help if the wonderful HMRC had a clue how much individuals in this country actually earned.......if they did then they wouldn't have to ASK claimants incomes when they fill in their Tax Credit forms, and maybe they wouldn't have given away millions of OUR money by Fraudsters who correcty sussed out that HMRC doesn't have a CLUE about who i who and what they earn.

The only way they will know how much we earn and thus how much Tax should have been deducted is if everyone filled out a Tax Return.

Mikeyorks

purch wrote:

SHOULD not MUST !!!.

Essentially the same thing in the context you (incorrectly) used it. As the Oxford Dictionary definition :-

• modal verb (3rd sing. should) 1 used to indicate obligation, duty, or correctness

purch wrote:

.... it would help if the wonderful HMRC had a clue how much individuals in this country actually earned.......if they did then they wouldn't have to ASK claimants incomes when they fill in their Tax Credit forms, and maybe they wouldn't have given away millions of OUR money by Fraudsters who correcty sussed out that HMRC doesn't have a CLUE about who i who and what they earn.

The only way they will know how much we earn and thus how much Tax should have been deducted is if everyone filled out a Tax Return.

Bit of a time warp there, I'm afraid. At the Govt insistence Credits are initially based on current income whereas Return income is up to 21 months after the income was first earned.

And as a lot of the fraud is via ID theft (hence the closure of the Govt tax credit portal) .... many of the people whose basic details were used - will have completed a Tax Return

andrewmoorcroft

I have worked for 3 large companies that take my company pension my salary. Each year my P60 quotes Gross, and taxable pay. The taxable pay = Gross - pension. People who go just into the 40% threshold often pay AVC's to increase their pension and therefore fall just below the 40% threshold. This becomes an efficient way of paying in. Ie dont pay much pension when you earn below and pay lots when you go above the threshold.
The taxation part is done automatically because you only pay tax on the taxable pay which does not include pension. None of us fill in tax forms to claim overcharged tax from pension payments.