Pension Advice - Mid 30s

atush

don't you have an acct? they would know this stuff (ie tax. ni etc)

And the fee is again, tax deductable

greensmoker

Hi Atush, thanks for your response.
My accountant is a little unsure how to go about this to be honest.
Basically, the company will be paying pension contributions on my behalf, without me submitting any myself.
How would that be noted on my tax credits renewals? it asks for pension contributions...

atush

If they are employers (and not yours) I don't believe you have to put them down on tax credit forms.

If your acct is unsure, perhaps you need a better one?

rpc

For tax credits, you list any personal pension contributions (i.e. contributions that are made from net pay, with relief at source). The gross contribution is then deducted from your gross salary.

Any employers contribution, salary sacrifice (which is really an employer contribution) or net pay pension payments aren't declared to tax credits because they should already be taken account of before reaching the gross salary stage.

All so simple - not! It tied my wife up in knots because her GPPP is relief at source (so tell tax credits) while my pension (sal sac) and AVCs (net pay) are not declarable. It doesn't help that the folks on the phone don't usually understand beyond "pension payment" which can lead to over/under declaring your income.

See http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/employment-income.htm

edit: in case that isn't clear - you do not declare employer pension contributions. Only personal contributions made from taxed pay under a relief at source arrangement are declared.

greensmoker

It's me again with my novice questions - and I really appreciate all your replies.
One more point I wanted to clarify...
the government adds 20% of any payment I make into my pension - up to a limit of £40,000 per year. The government does not add 20% of employers contributions.

somethingcorporate

No, because there has not been any tax paid on the contribution from the employer as it is a pre-tax expense (hence it being a good way to keep the company's tax bill down).

rpc

greensmoker wrote: »

the government adds 20% of any payment I make into my pension - up to a limit of £40,000 per year. The government does not add 20% of employers contributions.

Partly correct.

The government will add 25% to any personal pension contribution made from post-tax income. This is called relief at source and is just refunding the tax you paid.

Employee pension contributions made using the net pay arrangement don't get any uplift, because they are paid before tax is deducted.

Employer contributions are similar to net pay - you haven't paid income tax on them so they don't receive a 25% uplift as a refund of that tax.

If you didn't pay personal income tax on it then you don't get the uplift, but it doesn't make a difference. All the 25% extra on relief at source does is bring the contribution up to where it would be if it hadn't been taxed in the first place.

greensmoker

THank you rpc and somethingcorporate for your responses.

One further note: If my total earnings per year are less than the tax threshold - ie less than £10k, do I still get the 25% uplift?

atush

Yes. You get the uplift even if you dont' work at all (but only up to 3600)