Who actually puts their 40% tax relief back into their pension?

dano17439

Hi all

Just wondering this, so many articles about higher rate tax payers pension contributions only costing 60p for every pound, but in reality who actually puts their end of year rebate, or the extra income from the adjustment from their tax code back into their pension. Not me.....

CLAPTON

dano17439 wrote: »

Hi all

Just wondering this, so many articles about higher rate tax payers pension contributions only costing 60p for every pound, but in reality who actually puts their end of year rebate, or the extra income from the adjustment from their tax code back into their pension. Not me.....

maybe people choose their level of pension saving taking into account the tax situation

Linton

If you have an employers pension you probably pay gross and are never charged the tax in the first place and so never see it as a rebate. So if you put £100 into such a pension £100 goes there and your net wages drop by £60. In effect all of the rebate on your £60 does go into the pension.

If you are paying into a private pension HMRC return 20% to the pension and 20% to you so at least part of the tax does go to your pension.

dano17439

Linton wrote: »

If you have an employers pension you probably pay gross and are never charged the tax in the first place and so never see it as a rebate. So if you put £100 into such a pension £100 goes there and your net wages drop by £60. In effect all of the rebate on your £60 does go into the pension.

If you are paying into a private pension HMRC return 20% to the pension and 20% to you so at least part of the tax does go to your pension.

I pay NET into my works pension scheme and the basic relief is added back by my pension provider

HMRC then up my tax code to take into account the additional relief therefore I get more in my monthly NET pay, the difference being the relief.

My point was I spend this extra money to live on, rather than put it back into my pension. Was wondering who does the same?

dunstonh

dano17439 wrote: »

Hi all

Just wondering this, so many articles about higher rate tax payers pension contributions only costing 60p for every pound, but in reality who actually puts their end of year rebate, or the extra income from the adjustment from their tax code back into their pension. Not me.....

I find that people decide how much to pay based on 40% relief. How they get their tax relief is never an issue.

Linton

dano17439 wrote: »

I pay NET into my works pension scheme and the basic relief is added back by my pension provider

HMRC then up my tax code to take into account the additional relief therefore I get more in my monthly NET pay, the difference being the relief.

My point was I spend this extra money to live on, rather than put it back into my pension. Was wondering who does the same?

When I was paying into a pension I decided how much I wanted in the pension and paid the appropriate net amount. So the question never arose. Planning it that way seems to make more sense to me, but each to his/her own.

Lokolo

Salary sacrifice ftw.

atush

dano17439 wrote: »

I pay NET into my works pension scheme and the basic relief is added back by my pension provider

HMRC then up my tax code to take into account the additional relief therefore I get more in my monthly NET pay, the difference being the relief.

My point was I spend this extra money to live on, rather than put it back into my pension. Was wondering who does the same?

Most people probably put more into the pension, as they know they will be getting 20% back. So pay in 20% more?

dano17439

dunstonh wrote: »

I find that people decide how much to pay based on 40% relief. How they get their tax relief is never an issue.

Wonder how many actually do put the full relief into their pot if they make NET contributions from their wages though?

dunstonh

dano17439 wrote: »

Wonder how many actually do put the full relief into their pot if they make NET contributions from their wages though?

They dont need to as they are focusing on the gross figure and affordability on the net figure.

£Nash£

I have a related question on tax relief on pension contributions.

If I decide to make use of the 'carry forward' annual allowance from previous years (on which I have already paid 40% income tax ) to maximize my pension contribution this year, will I get tax relief at 40% on the contribution?