Tax relief on pensions, higher rate tax payer

1.8T

Hi,

I am a 40% tax payer, I get paid monthly by my company through PAYE. My company pays equivalent of 5% of my salary into my pension plus matching whatever I pay in. At the moment I pay 3% so in total I pay 3% of my salary and my company pays 8%.

Am I correct in saying at the moment my pension company (L&G) claims back 20% for me? If so is this just for my contributions (the 3%) or for the whole lot including what my company pay in?

I have read that higher rate tax payers can claim back the additional 20% more but this has to be done through a tax return. How do I go about doing this? As I pay tax by PAYE I don't file a tax return at the moment. This leads my back to my previous question again, is what I can claim back just for what I have paid into the pension or for the whole lot?

Any assistance would be gladly received!

Thanks

nicknameless

I think your pension contributions will be deducted before the remainder of your salary is taxed if via PAYE therefore no tax to claim back.

coyrls

Your company pension contributions under PAYE are more than likely taken out of your income before tax is applied (check your payslip), in which case neither L&G or you can claim any tax refund.

1.8T

Ah that makes sense, thanks guys. I'll take it then the tax relief and claiming it back only really applies if you don't get paid PAYE then?

gadgetmind

You need to check if you're paying via "salary sacrifice", in which case it comes out before tax and NI.

If it isn't, then it's coming out of post tax/NI pay, so the extra needs to be claimed back or coded into your tax code.

coyrls

1.8T wrote: »

Ah that makes sense, thanks guys. I'll take it then the tax relief and claiming it back only really applies if you don't get paid PAYE then?

It applies to non-work pensions (e.g. a SIPP). So if in addition to your workplace pension you also took out a SIPP, your SIPP provider would claim back 20% and you would claim the remaining 20% back through your tax return for your SIPP contributions.

Your_Hero

coyrls wrote: »

It applies to non-work pensions (e.g. a SIPP). So if in addition to your workplace pension you also took out a SIPP, your SIPP provider would claim back 20% and you would claim the remaining 20% back through your tax return for your SIPP contributions.

Not necessarily - this is true if it is an occupational pension scheme (not just any "workplace" pension). Not all employers deduct the pension contributions from gross salary especially if it is a contracts-based pension, such as group personal pensions. Unless specifically stated by the employer that it is deducted from gross salary or via salary sacrifice, then it probably isn't.

As this pension is with L&G, chances are it is a GPP and OP would need to reclaim the higher rate relief via tax return.
http://www.scottishlife.co.uk/scotlife/web/site/consumer/employees/conempgpp.asp
https://www.moneyadviceservice.org.uk/en/articles/group-personal-pensions

gadgetmind

Your_Hero wrote: »

Unless specifically stated by the employer that it is deducted from gross salary or via salary sacrifice, then it probably isn't.

Sal sac requires a change to the contract of employment, and so needs explicit employee consent.

jem16

gadgetmind wrote: »

You need to check if you're paying via "salary sacrifice", in which case it comes out before tax and NI.

Or that it simply comes out of gross pay before tax and NI but is not a salary sacrifice arrangement.

gadgetmind

I've never met that approach and we get nearly 11% of a boost on our contributions as our employer gives us most of the 13.8% employer's NI savings, which is nice!

jem16

gadgetmind wrote: »

I've never met that approach and we get nearly 11% of a boost on our contributions as our employer gives us most of the 13.8% employer's NI savings, which is nice!

It is nice when you can get salary sacrifice.

However most occupational pension contributions (for trust based schemes) take from gross pay so tax relief is automatic but NI is still paid in full or at a reduced contracted out rate if a defined benefit scheme (until next April anyway).