Pension tax relief

zagfles

Supernova wrote: »

Received the P800 for 2012-13 today.

Adding in bank interest of £1850 to the £38K P60 they have given me a rebate of £185.

Will I still owe anything now re: the £2K L&G pension overpayment (was £4K) or is that the end of it from their point of view?

Thanks

Did you declare pension contributions of greater than earnings on your tax return? If so I'd have thought they'd charge you the excess tax relief in the calculation. If not you're best declaring it as they'd probably find out eventually...

TBH if you're going make very large pension contributions and use the carry-forwards of previous years you really need to understand the rules inside out - the HMRC website has a good guide http://www.hmrc.gov.uk/incometax/relief-pension.htm

For instance it's important to realise that an occupational scheme may have a "pension input period" which doesn't align with the tax year, the £50k limit for a particular tax year applies to the pension input period ending in that tax year. So contributions made in an earlier tax year could count towards the limit in the following tax year not the one in which the contributions were made.

Supernova

zagfles wrote: »

Did you declare pension contributions of greater than earnings on your tax return? If so I'd have thought they'd charge you the excess tax relief in the calculation. If not you're best declaring it as they'd probably find out eventually...

TBH if you're going make very large pension contributions and use the carry-forwards of previous years you really need to understand the rules inside out - the HMRC website has a good guide http://www.hmrc.gov.uk/incometax/relief-pension.htm

For instance it's important to realise that an occupational scheme may have a "pension input period" which doesn't align with the tax year, the £50k limit for a particular tax year applies to the pension input period ending in that tax year. So contributions made in an earlier tax year could count towards the limit in the following tax year not the one in which the contributions were made.

Thanks

The PIPs are all aligned to the tax year.

I didn't do a tax return as I was all PAYE but wrote them a letter in April and later sent all the proof they requested (P60, total PP contrib statements etc.)

I'm not sure that even the HMRC site would have helped my fundamental misunderstanding. If this is the end of it then I'm happy enough with the result.

gadgetmind

Supernova wrote: »

So there is no tax relief whatsoever from carry forward years? I thought that was the point of the £50K carry forward tax allowance.

As jem16 says, you can't put more into a pension pa than your gross salary and get tax relief. What carry forwards lets you do is exceed the current £50kpa (£40k next year) annual allowance.

Funny how I ran all of this past advisors at Jardine Lloyd Thompson, Hargreaves Lansdown, two IFAs, several wealth managers and it turns out to have been completely wrong.

I'm not at all surprised.

I also ran my plans past an accountant and JLT to be told they were OK. I then discovered about Pension Input Periods, redid all the calculations myself, and then had to get my accountant to resubmit two tax returns. I now don't trust anyone to do personal allowance or pension input period calculations on my behalf.

gadgetmind

zagfles wrote: »

For instance it's important to realise that an occupational scheme may have a "pension input period" which doesn't align with the tax year

As can non-occupational ones including SIPPs. My Group Personal Pension has three plans within it and all have different PIPs!

So contributions made in an earlier tax year could count towards the limit in the following tax year not the one in which the contributions were made.

Yes, but to make it more fun, they reduce your taxable income for the current tax year even if they might well count towards an annual allowance in the next one. My spreadsheets for "what if" purposes regards this are hideously complex.

The real irony is that PIPs came to us courtesy of Pensions Simplification!

jem16

Supernova wrote: »

Received the P800 for 2012-13 today.

Adding in bank interest of £1850 to the £38K P60 they have given me a rebate of £185.

Will I still owe anything now re: the £2K L&G pension overpayment (was £4K) or is that the end of it from their point of view?

Thanks

How did the £4k overpayment get down to £2k? Savings income doesn't count for tax relief purposes.

Supernova wrote: »

I didn't do a tax return as I was all PAYE but wrote them a letter in April and later sent all the proof they requested (P60, total PP contrib statements etc.)

Yes but have you included the total paid into your pension via salary sacrifice?

If you have only mentioned PP contributions, then no I don't think this is sorted.

FatherAbraham

jem16 wrote: »

Yes but have you included the total paid into your pension via salary sacrifice?

If you have only mentioned PP contributions, then no I don't think this is sorted.

I don't understand. Why would employer contributions to the pension have any bearing on personal taxation?

Warmest regards,
FA

Supernova

jem16 wrote: »

How did the £4k overpayment get down to £2k? Savings income doesn't count for tax relief purposes.

Ah, OK.

jem16 wrote: »

Yes but have you included the total paid into your pension via salary sacrifice?

If you have only mentioned PP contributions, then no I don't think this is sorted.

Isn't the Salary Sacrifice reflected in the P60? I told them in the letter I had contributed £42K but that was incorrect.

Thanks

zagfles

jem16 wrote: »

How did the £4k overpayment get down to £2k? Savings income doesn't count for tax relief purposes.



Yes but have you included the total paid into your pension via salary sacrifice?

If you have only mentioned PP contributions, then no I don't think this is sorted.

Assuming the OP hasn't exceeded the £50k pa allowance taking into account carry-forwards, there's no need to mention the salary sacrifice. It sounds like that's not the issue, the issue is that his PP contributions last year exceeded his P60 earnings.

jem16

FatherAbraham wrote: »

I don't understand. Why would employer contributions to the pension have any bearing on personal taxation?

Warmest regards,
FA

No you're correct - it wouldn't.

I should have re-read the thread before replying.

Supernova wrote: »

Ah, OK.



Isn't the Salary Sacrifice reflected in the P60? I told them in the letter I had contributed £42K but that was incorrect.

Thanks

Forget salary sacrifice - it's ( or most likely me with that last post ) confusing the issue.

You had £38k relevant earnings. You made £42k worth of PP contributions. That takes you £4k above your relevant earnings for tax relief purposes.

jem16

zagfles wrote: »

Assuming the OP hasn't exceeded the £50k pa allowance taking into account carry-forwards, there's no need to mention the salary sacrifice. It sounds like that's not the issue, the issue is that his PP contributions last year exceeded his P60 earnings.

No you're correct. I replied before re-reading the thread to remind myself what was going on.