Relief at source

trenchwars

When I pay money into my private pension I get 20% tax relief at source paid into my pension account. Is it a tax rule that the 20% has to be paid into the pension account? Is there any way to get the 20% immediately?

pjread

Well, if you put in say £80 and £20 goes to your pension, that's a £100 contribution that cost you £80.

Are you saying you just want £80 in the pension? If so decrease your contribution to £64 and then that gets grossed up to £80. Same effect as getting "paid" the relief. Basically just think about the gross input to the pension being the contribution.

trenchwars

I should explain that I want to use pension contributions to get my income below the 40% level but I would prefer to have the tax relief now rather than added to my pension. This is already the case with half of the relief which is claimed by adjusting my tax code.

If I cut my contributions then I will be back paying 40% again.

MoneySavingUser

pjread wrote: »

Well, if you put in say £80 and £20 goes to your pension, that's a £100 contribution that cost you £80.

Are you saying you just want £80 in the pension? If so decrease your contribution to £64 and then that gets grossed up to £80. Same effect as getting "paid" the relief. Basically just think about the gross input to the pension being the contribution.

No I think the OP wants to somehow get his hands on the 20% and put it in his pocket!

He can't really do that:

Put in £80, get tax relief of £20 total "received" £100

Put in £64, get tax relief of £16

Amount not put in £16 which is taxed at 20% so you get £12.80 i.e. you "receive" £80 + £12.80 = £92.80

(all ignoring NICs)

trenchwars: if you were a 40% taxpayer you could claim the additional 20% via your tax return so it would come back into your pocket.

edit: once you become a basic rate taxpayer you can't get it back so no

xylophone

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

sandsy

trenchwars wrote: »

but I would prefer to have the tax relief now rather than added to my pension. This is already the case with half of the relief which is claimed by adjusting my tax code.

If I cut my contributions then I will be back paying 40% again.

If you have it now then it's not tax relief on your pension. This is NOT the case with half of the relief which is claimed back as you make a higher contribution in the first place to offset the relief which can't be relieved at source.


eg. if you earn £50k, you need to have about £8k going into the pension to bring you down to BRT. As a 40% taxpayer, the cost to you to get a payment of £8k in your pension is £4800. But because you can only claim 20% at source, you need to make a payment of £6400 and £1600 relief is added to get to £8k. You then claim back the other £1600 so that the true cost to you is £4800.

trenchwars

Thanks for the info.