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

bigadaj

BillJones wrote: »

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?

It depends on your particular circumstances. You can't claim back tax relief form previous years which is what I believe was the case I was quoting, that poster thought he could claim back 40% tax relief from previous years having presumably already used up all the higher rate tax relief for teh current tax year.

You can carry forward the allowances and so presumably contribute far more than £50000 for this particular tax year, and if you've paid tax at 40 or 45% in this year then you get the relief on this years tax payments, not on previous higher or additional rate payments.

The ability to do this is obviously limited going forward as previous years allowances are used up, particularly as my understanding is that you always use the current years allowance first.

thenudeone

BillJones wrote: »

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?

Maybe a history lesson would help.

Many years ago, when pension contributions were limited to a low percentage of your income depending on your age (eg: 15%) you used to be able to carry forward unused allowances for a few years. You could also elect to backdate a contribution into a previous taxyear.
When the contribution limit was raised to 100% of income, the carry forward rules were abolished. The rule now is:

#######################################
YOU CAN NEVER GET TAX RELIEF ON MORE THAN 100% OF CURRENT TAX YEAR INCOME.
#######################################

If your income is more than £50k, and you contributed less than £50k in previous tax years, you can carry forward any unused £50k, BUT YOU CAN STILL ONLY CONTRIBUTE CURRENT YEAR'S INCOME.

ozzage

thenudeone wrote: »

#######################################
YOU CAN NEVER GET TAX RELIEF ON MORE THAN 100% OF CURRENT TAX YEAR INCOME.
#######################################

Unless it's an employer contribution

thenudeone

ozzage wrote: »

Unless it's an employer contribution

.. in which case, YOU aren't getting tax relief on that part of the contribution; your employer is.

nicknameless

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.....

Going back to the OP's question. I don't at the moment, choosing to invest this outside of a pension (but still with early retirement in mind) because of the added flexibility with non-pension investments. If the budget proposals find their way into legislation I will be upping my within (private) pension contributions.

Bunker

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 haven't been. Its taken me quite a while to figure out that what I thought I was contributing wasn't really going in as my HRT rebate comes in the form of a reduction in my Self Assessment (all worked out by my accountant). I didn't appreciate that the reduction should have been going back into the pension if I wanted to contribute what I thought I was.