Paid £9500 avc but only £1529 tax relief?

jem16

philng wrote: »

I dont understand if my PAYE earnings are £52000 which was increased to this level by approx £2500 for Co Car & then full tax allowance aplied, why I dont get 40% relief on my AVC payment.

You should be getting the full 40% relief. You need to get back onto HMRC as they seem to be mistakenly taking this to be a claim for the higher rate tax relief for those that already have received basic rate tax relief.

philng wrote: »

In house AVC but when I paid the £9500 in in March they said they couldnt automatically apply tax relief but to apply via HMRC.

That's correct assuming you are buying Additional Pension in your final salary scheme - are you?

philng wrote: »

The total income is worked as follows:

48952 PAYE
2964 Car Benefit
117 Gross Interest received

52033 Total

p60 Tax Paid 10429

You would be entitled to 40% tax relief on £9558 of pension contributions. You are going to have to pay an extra 20% tax on £58 of your gross interest as your pension contributions weren't quite enough to take you back into basic rate tax.

So by my calculations, you are due 40% of £9500 which is £3800 and have to pay 20% of £58 which is £11.60.

Follow the link in Post 5 and get back onto HMRC. Try and make sure they understand that this is a payment to a final salary scheme where no tax relief has been given.

philng

So what is the impact of them increasing my 20% allowance from £35000 to £44500 to allow for the AVC payment?

jem16

philng wrote: »

So what is the impact of them increasing my 20% allowance from £35000 to £44500 to allow for the AVC payment?

It only allows you the extra 20% which is correct for those paying into a personal pension where the pension provider adds 20% basic rate tax relief.

It is not correct in your situation. Plus if I were you, I would be asking HMRC for a cheque refund(or direct to bank account) as opposed to an alteration in tax code.

philng

I find it incredible they could make such an error. The certificates I sent from my employer clearly state no tax relief has been applied.
If I had not been so switched on then I would have missed out on £1900 extra relief.

jem16

philng wrote: »

I find it incredible they could make such an error. The certificates I sent from my employer clearly state no tax relief has been applied.
If I had not been so switched on then I would have missed out on £1900 extra relief.

Unfortunately they seem to do it frequently as they seem to have problems with pension payments where no tax relief has already been applied.

Let us know what they say.

dunstonh

I find it incredible they could make such an error. The certificates I sent from my employer clearly state no tax relief has been applied.

Why was no basic rate tax relief taken into account at point of contribution?

xylophone

I have just spoken to someone with same type of pension (and higher rate taxpayer) who used in house AVC - if contributions were made through payroll the full (40%) relief was given at source - if he paid by lump sum outside payroll, then tax relief had to be claimed by entering gross premium on his self assessment form.

philng

I made the contribution in march 2012 and they wrote to me with a certificate advising they were unable to apply tax relief via page system. It was very clear on this document that no tax relief had been applied.

jem16

philng wrote: »

I made the contribution in march 2012 and they wrote to me with a certificate advising they were unable to apply tax relief via page system. It was very clear on this document that no tax relief had been applied.

Just to make things a little clearer here. Is the AVC buying you extra final salary pension or is it building up a pot of money to be used to buy a pension?

philng

It is buying me an extra cash pot not extra years. I have been told I can draw the AVC cash pot on retirement as a lump sum rather than taking a lump sum from the main scheme up to certain limits.