Personal Pension Relief

Tango130

This tax year I have been in the fortunate position of working away quite bit and have earnt substantially more than I would normally do. I contribute to both a workplace pension (smart adjust) and a SIPP.

The numbers:
Taxable Salary - £46,000
Smart - £1424.03
SIPP - £3400

I have phoned HMRC and claimed my Personal Pension Relief on my SIPP contributions and that has been added to my tax code.

My smart contributions are taken at source and I was under the impression that relief cannot be claimed on this amount.

My question comes from reading the final paragraph from the following statement on the Gov website. From reading the statement I now believe I could claim Personal Pension Relief on the smart contributions also. Am I correct?

How relief at source works
A member making a contribution to their pension scheme will automatically get tax relief at the basic rate of 20%. The amount paid to the scheme is treated as having had an amount equivalent to basic rate tax deducted.

The scheme administrator claims the basic rate tax relief from HM Revenue & Customs (HMRC) and adds it to the pension pot. This applies whether or not the member pays tax.

For example if a member wants to make a £100 contribution they’ll only need to pay £80 into their pension scheme. The scheme administrator reclaims £20 from HMRC making up the pension pot to £100.

If the member is a higher rate taxpayer they can claim any extra tax relief due through their tax return or by contacting HMRC. If the member is an additional rate taxpayer they’ll have to claim the extra relief through their tax return.

Hopefully this has made sense.

jem16

Tango130 wrote: »

My smart contributions are taken at source and I was under the impression that relief cannot be claimed on this amount.

Correct. Your tax relief is automatic as your taxable pay has been reduced.

My question comes from reading the final paragraph from the following statement on the Gov website. From reading the statement I now believe I could claim Personal Pension Relief on the smart contributions also. Am I correct?

No you are not correct.

Smart contributions are salary sacrifice, not Relief at Source schemes. Your taxable pay has been reduced and you pay less tax so you have the full tax relief. There is no more to claim.

Linton

Your smart contributions arent "taken at source". They are in effect an employer contribution, your gross salary being reduced by the appropriate amount. So you havent paid the smart contributions, your employer has, so you cant claim tax relief, especially as no tax has been deducted.

Tango130

Cheers guys, thought it was too good to be true!

robin61

Linton wrote: »

Your smart contributions arent "taken at source". They are in effect an employer contribution, your gross salary being reduced by the appropriate amount. So you havent paid the smart contributions, your employer has, so you cant claim tax relief, especially as no tax has been deducted.

That's an interesting point. I wonder if the next government move to reduce tax relief from 40% to 30 or even 20% there might be a loophole here for smart pension and smart AVC schemes ?

kidmugsy

robin61 wrote: »

That's an interesting point. I wonder if the next government move to reduce tax relief from 40% to 30 or even 20% there might be a loophole here for smart pension and smart AVC schemes ?

More likely, I'd guess, that they'd just sweep away Salary Sacrifice altogether. You could always enquire of Mr "Krystal" Balls.