Claiming Pension Tax Relief

chemicalbrother

Hi,

I really need some help, I`ve been trying to read round the subject but just find it so confusing. All I`m trying to find out is whether I can claim Tax Relief for this year.

Is this based on a special type of pension, or is it any pension that can claim it?

I realise the differences for different tax levels, but can't seem to find an easy answer for whether I can apply.

I would be really grateful if someone could help me out.

Thanks in advance.

Regards

Alex

hugheskevi

All I`m trying to find out is whether I can claim Tax Relief for this year.

For 2014/15? Too late for an in-year Coding Notice adjustment (but you could put one in place for the coming year to avoid this happening again), so it can be done either via Self-Assessment or by writing in to HMRC if you do not do Self Assessment (probably best to wait for for your P60 as they may want that).

Is this based on a special type of pension, or is it any pension that can claim it?

Any pension, but it isn't the pension claiming it. If pension contributions have resulted in the wrong amount of tax being taken then all you are doing with HMRC is correcting your tax position.

I realise the differences for different tax levels

Not forgetting that different methods of payment (net pay arrangement vs relief at source) give different positions, and some pensions don't apply any tax relief at all, and the whole amount has to be claimed from HMRC.

but can't seem to find an easy answer for whether I can apply.

Did you pay more tax than you should have paid? If so, tell HMRC and get the refund. You simply need to work out your taxable income, tax paid, and whether the amount of tax paid is correct.

chemicalbrother

This is why I got confused reading about it. Its so hard to understand. All I know is :

I pay into a pension. A financial adviser claimed for what I was owed in Tax relief a couple of years ago. I changed jobs and moved cities, now I`m trying to understand whether I can apply to HMRC for tax relief to be refunded to me. I am a higher rate tax payer @ 40% and a PAYE employee so I don't do self assessment. Would you advise I just get a financial adviser to deal with it? Or is it easy enough for me to organise, I know last time it didn't look like the financial adviser had to do a lot i.e. 1 letter and he took about £300 for the privilege. Sorry if I appear dense but this is really hard for me to wrap my head around.

hugheskevi

I pay into a pension.

There are three main ways this can be done.

First, your employer can deduct the contribution from your gross salary. In this case all tax relief due should be automatically applied.

Second, your employer can use salary sacrifice. This reduces your salary and the employer makes a pension contribution equal to the reduction. Again, all tax relief due is automatically applied.

Third, payments can be made from after-tax money. In this case the pension provider probably applies basic rate relief and the higher rate relief must be applied for from HMRC.

From your payslip you should be able to identify which method is used. If you make personal contributions without any employer involvement it will be the third method.

Would you advise I just get a financial adviser to deal with it? Or is it easy enough for me to organise, I know last time it didn't look like the financial adviser had to do a lot i.e. 1 letter and he took about £300 for the privilege.

It is very simple - quite literally a phone call or letter.

It is worth setting aside time to learn the basics about the income tax and National Insurance system, it is very helpful to understand how it all works and isn't really very complicated.

The things you need to know are your taxable income and tax paid. That needs to cover income from all taxable sources (for example, employment and interest payment) and charity donations and pension contributions.

From that, you can calculate whether you paid the correct tax (use online calculators, or just post the figures here and folk can tell you). If you paid the wrong tax, all you need to do is tell HMRC the taxable income and probably provide evidence of the pension contribution. HMRC do the calculations and make the correction - possibly via cheque payment, possibly via a change to your 2015/16 Tax Coding Notice.

None of the above is difficult, and certainly no need for a financial advisor. The hardest part is gathering data to work out taxable income and tax paid, which you would probably being doing most of the work for anyway. There are other reasons your Tax Code may not be accurate, and that results in the wrong amount of tax being paid. Spending a morning learning about the system would be time well spent for the future.

xylophone

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

Can you give more information about your pension scheme? Occupational? Private?

http://www.retirementplanner-sw.com/digital_assets/15896/Relief_at_source_and_net_pay_-_avoiding_confusion.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377240/sa100_2013-2014_.pdf

Maybe printing out the above and completing them as a kind of 'dummy run" would help?

Sobraon

@hugheskevi describes interaction with HMRC in the way it *should* happen but unfortunately I think they are under such pressure that this is not how things are working now.

In your first letter to the HMRC about claiming back higher rate tax relief be very clear if this is a contribution after tax and a private arrangement outside of your employment (if this is the case) or HMRC may refer to your payroll officer (standard response from HMRC to both myself and MrS individually over a two year period). Given the response time to letters is now getting on towards three months it pays to be very clear. I now always get confirmation of delivery from the post office.

Secondly if after 6 or 7 weeks you do think its worth while ringing them up, prepare for a long wait on the phone (sometimes 20 mins) . When you do get through to the call centre staff be aware they do not have access to correspondence (so they say). Also as you would expect the call centre staff don't really understand the calculations done by HMRC and seem unable to pass you onto someone who can help.

On occasions they have promised call backs and will take phone numbers, unfortunately this doesn't seem to happen and you may get a letter regarding your call some weeks later.

So for single contributions to SIPPs over the last three years on average I needed to contact HMRC by letter at least twice (remember record of delivery) and it takes on average 4/5 months to get a tax refund.

For refunds I always request a warrant/cheque because I dread the issues that would be generated by accepting a change in coding for the next tax year. So far I have managed to either get an in-year coding change or a warrant in May of the following tax year.

My experience is then that one has to be extremely patient with HMRC in getting higher rate tax relief on eligible pension contributions.

penwise

"From your payslip you should be able to identify which method is used. If you make personal contributions without any employer involvement it will be the third method."

How do you identify this from your payslip
Thanks

jem16

penwise wrote: »

"From your payslip you should be able to identify which method is used. If you make personal contributions without any employer involvement it will be the third method."

How do you identify this from your payslip
Thanks

If your taxable pay is less than your gross pay by the amount of your pension contributions then you pay from gross pay and already have full tax relief.

If taxable pay and gross pay are the same then you are paying from net pay and need to claim any higher rate tax relief.