Paying tax on pension payments

Gervs

My company are currently not reducing my taxable amount by my pension contributions. I have only just noticed this, but it has been going on for about 2 years now. Am I able to claim this tax back from HMRC or should my employer re-imburse me?

It's working out roughly £60 per month that I am being overtaxed.

CLAPTON

what sort of pension contributions are you making

Gervs

I'm paying 4% of my income into a Group Pension scheme

jamesd

Your employer has no obligation or reason to reimburse you.

It appears that your payments are into a personal pension or group personal pension. If those are made from after tax pay, around the end of the following month an additional 25% would be added to your pension contributions. Some pension companies might just increase the initial amount instead of adding the extra later.

Alternatively your employer may be operating a salary sacrifice scheme. In those cases the money is taken before income tax and NI are deducted and your gross taxable pay is reduced, so you get the tax relief that way instead of as an add-on.

Check with the pension company to see whether these are being recorded as employee (need to add 20%) or employer (gross, no more relief to be added) payments. But first check your statement, online perhaps, to see if you can see that extra 25% being added later.

I'm assuming that you're not a higher rate tax payer, there's more to know if you are.

Gervs

Thanks James,

I can see my employer is paying in more than me each month to my pension scheme. For example, I paid £150, my employer paid £187.50.

I am confused, I thought that pension contributions were taken before tax and therefore I didn't pay any tax on them?

jamesd

Whether they are taken before or after tax just depends on how the employer has the scheme set up. Salary sacrifice - before tax, including before NI, is the most tax-efficient way but payments can't be varied throughout the year.

You'll probably find that the employer part is before tax and isn't included in your taxable pay. There would also be no tax relief to be added to that part by the pension scheme. The part by you would need tax relief somehow and for a basic rate tax payer that's normally adding the 25% after it's put into the scheme.