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

bigadaj

£Nash£ wrote: »

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?

No, you only get it for the actual year you are paying in.

Seems like an odd original question though could be useful in focussing people's minds on why they pay into the pension and what they expect from it. There seem to be three potential approaches, either maximising employer or tax contribution at higher rate, paying in the maximum you can afford on a limited income or contributing a reasonable amount at an assumed growth rate to achieve a target pot.

wotsthat

I claim back tax on my contributions via a self assessment - I don't want my employer to know just how hard I'm saving to get out.

Tax rebate turns up in June and it goes straight into the pension.

Doshwaster

wotsthat wrote: »

I claim back tax on my contributions via a self assessment - I don't want my employer to know just how hard I'm saving to get out.

Tax rebate turns up in June and it goes straight into the pension.

I also claim back through my tax return but I must admit that I spend it.

If you do put the rebate into your pension what is to stop you claiming tax back again on that amount just as you would with any net contribution?

lisyloo

If you do put the rebate into your pension what is to stop you claiming tax back again on that amount just as you would with any net contribution?

I can't see any reason you can't do this, but the logic would be that you were putting in earned income, not the tax relief you'd had back.

Personally I don't physically make a lump sum to put it back in, but I do take it into account when deciding what to contribute. The same with gift aided charity contributions.

thenudeone

£Nash£ wrote: »

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?

You cannot carry forward unused allowance like you used to be able to. The maximum you can contribute is 100% of current tax year earnings, regardless of earnings or contributions in any previous tax year. You will only get tax relief based on this year's earnings.

The only "carry forward" you can do now applies if you want to contribute more than £50k this year (and have earnings this year to cover it), in which case unused "£50k allowance" can be carried forard, but you must still have sufficient earnings this year for the full value of the contribution.

Eg: if you earn £50k pa for three years, you can't decide to put £150k in a pension in year 3. Your absolute maximum contribution limit is your earnings for the current year.

wotsthat

Doshwaster wrote: »

If you do put the rebate into your pension what is to stop you claiming tax back again on that amount just as you would with any net contribution?

As long as there's earned income to support the rate it's not an issue.

I don't view it as a special payment. I plan for it at the beginning of the year - just part of the total contribution.

£Nash£

Thank you all for your responses. I searched the web, tried the HMRC site and even rang them without success. This forum however gave me an unambiguous answer in less than a day. Thanks. All that remains now is make a contribution before 5th April!

chucknorris

dano17439 wrote: »

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

I invested up to the max annual allowance this tax year and intend to carry on doing so until retirement (probably 4-5 years time).

BillJones

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.....

As I'm on PAYE, it goes in gross in the first place, so each £1,000 that I put in each month only costs me £550 reduction in salary.

BillJones

bigadaj wrote: »

No, you only get it for the actual year you are paying in.

This seems contradicted by the following responses, and by what I understood to be the case. I was planning on putting in the full allowance for previous years, are you sure that you are right?