Tax bonus on pension contribution or just a mirage ?

madeinireland_2

I am hoping someone with experience of making personal pension contributions will be able to advise me what is going on here but ....

I made a large pension contribution of £50000 in Feb.

The pension company added the 20% to make it £62500.

I claimed back through a tax return my expected sum relating to the additional 20% as I am a 40% tax payer. This sum was about £8000.

I today received confirmation that my bank will be credited with the £8000 but in my salary for this month I received a fairly large tax repayment and my tax code was changed. If I multiple the refund by 9 (the remaining months of the tax year) it comes to about £12500 but that might just be chance.

So what's going on ? Is this a !!!! up by the tax office ?

Thanks.

sandsy

If the gross contribution was £62,500, the net contribution before tax relief at 40% would have been £37,500. You paid in £50k so you were entitled to £12,500 back, not £8,000.


This is presuming you were entitled to make such a large payment by virtue of your income and no annual allowance tax charge (eg. if you used carry forward).

Charlton_Taz

Something like this happened to my OH. Did self-assessment in May 14 for last tax year to recover £6,250 of pension tax relief on a contribution he made. HMRC changed his tax code to 'pay' it back to him, but also paid £6,250 into our bank account! We rang them up and they said that they had adjusted his tax code as well, as they 'assumed' it was a regular contribution to his pension scheme. Idiots! We got them to change his tax code back to what it was before they meddled with it.

coyrls

Charlton_Taz wrote: »

Something like this happened to my OH. Did self-assessment in May 14 for last tax year to recover £6,250 of pension tax relief on a contribution he made. HMRC changed his tax code to 'pay' it back to him, but also paid £6,250 into our bank account! We rang them up and they said that they had adjusted his tax code as well, as they 'assumed' it was a regular contribution to his pension scheme. Idiots! We got them to change his tax code back to what it was before they meddled with it.

Yes, I've had this experience, they just take all the claims from the previous tax year and assume you will make identical claims in the current tax year (even if it would be impossible for you to do so because you used a "carry forward" allowance).

madeinireland_2

That's what I was afraid of....

What would happen if I just let this run on - I suppose I could just save the money and make a bit of money for a while before they demand it back.

In this case they appear to be paying me back for the £12500 that the pension scheme claimed so I'm still not certain it's the same as your situation

madeinireland_2

In reply to sandsy - not all the contribution aligned to 40%hence the difference

xylophone

(eg. if you used carry forward).

OP says he made the payment in Feb 2014 - previous tax year (or pension input period) when the allowance was £50,000?

http://www.hmrc.gov.uk/pensionschemes/understanding-aa.htm

http://www.hmrc.gov.uk/incometax/relief-pension.htm

In the OP's position I'd make haste to clarify the position with HMRC.

dunstonh

I made a large pension contribution of £50000 in Feb.

The pension company added the 20% to make it £62500.

You have exceeded the annual allowance. Did you use carry forward for this transaction? If not, you are not going to get tax relief above £50,000 gross (assuming there are also no other pension contributions in the tax year - if so, the tax hit will be higher still)

madeinireland_2

I used carry forward for some of this and yes the allowance was £50k last year.

I can see how the tax office could !!!! up on the amount I claimed in my tax return but they appear to have started to make the rebate the amount claimed by the pension company for the year.

Someone says I should clarify with tax office but why shouldn't I just put it into an account and pay it back when they come calling ?

dunstonh

I used carry forward for some of this and yes the allowance was £50k last year.

The allowance was £50k but it is gross. Not net.

madeinireland_2

Yes but I had loads of carry over spare and still do for this year.