SIPP Tax Relief Calculation

MoneySavingUser

Hi,

I noticed this topic 'SIPP Tax Relief Calculation error' where the poster talked about a tax code change the following year to adjust for his lump sum.

I have made a lump sum contribution of £5000 this year and the provider has claimed £1250 from HMRC.

When I get my 13/14 tax code will it be the personal allowance + 1250?

For some reason I was thinking that the £1250 would come out of the tax that I have already paid to HMRC this year rather than being adjusted for later.

kidmugsy

MoneySavingUser wrote: »

I have made a lump sum contribution of £5000 this year and the provider has claimed £1250 from HMRC.

In the jargon, this means that you have contributed £6250 "gross".

MoneySavingUser wrote: »

When I get my 13/14 tax code will it be the personal allowance + 1250?

No, they'll have to give you an extra personal allowance big enough so that the tax saving it causes you is £1250.

MoneySavingUser wrote: »

For some reason I was thinking that the £1250 would come out of the tax that I have already paid to HMRC this year rather than being adjusted for later.

If you'd like your money sooner (and in your shoes I would) you should ring HMRC and explain that you'd like the form that lets you claim back the £1250. Or perhaps some kind soul could provide a link for downloading it?

Deneb

kidmugsy wrote: »

If you'd like your money sooner (and in your shoes I would) you should ring HMRC and explain that you'd like the form that lets you claim back the £1250. Or perhaps some kind soul could provide a link for downloading it?

I just wrote to my tax office and explained that I had made contributions off £xxx gross/£xxx net into a personal pension in the current tax year and wished to reclaim additional tax relief in accordance with my HRT liability. It worked perfectly well

MoneySavingUser

kidmugsy wrote: »

If you'd like your money sooner (and in your shoes I would) you should ring HMRC and explain that you'd like the form that lets you claim back the £1250. Or perhaps some kind soul could provide a link for downloading it?

Sorry I am a little bit confused:

The £1250 has already been 'claimed' by Hargreaves Lansdown and has gone into my SIPP in December.

I have looked on the HMRC and it seems that higher rate taxpayers need to claim tax relief.

But as I am only a basic rate taxpayer does this mean I don't have to do anything else?

I think my question is where does the £1250 that Hargreaves Lansdown now have come from? Did HMRC take it off the tax they have collected this year from me?

Deneb

MoneySavingUser wrote: »

I think my question is where does the £1250 that Hargreaves Lansdown now have come from? Did HMRC take it off the tax they have collected this year from me?

Effectively, yes. You pay contributions into a personal pension net of 20% tax. HL reclaim the additional 20% from HMRC to make up your total contribution. If you intend to pay a gross contribution of £1000 into your pension, you pay HL £800 and HMRC put in the additional 20% on your behalf.

As a basic rate taxpayer, there is nothing more to reclaim, but someone who has a 40% or 50% tax liability can reclaim the additional tax already paid as further relief against their contributions up to the amount of their higher or additional rate liability.

MoneySavingUser

Thank you Deneb