Is my tax rebate correct?

mike5678

Hi all, I just received a tax rebate from HMRC following a lump sum pension payment I made in March 2015.

If I go over the figures below could someone tell me if it's correct? This is what it states in the letter from HMRC;

Total PAYE income - £55,134
Tax paid - £11,677
Personal Allowance - £10,000
Income tax chargable on - £45,134

I made a lump sum pension payment to my SIPP of £12,200 to benefit from as much 40% rebate as possible.

Tax on £45,134 is;

Basic rate at 20% on £44,065 = £8,813
Higher rate at 40% on £1,069 = £427.60

Tax chargeable - £9,240.60

Tax overpaid - £2,436.40 (which is what my cheque is for)

(The basic rate has been extended from £31,865 to £44,065 to account for the £12,200 pension payment)

In my SIPP my £12,200 payment was grossed up to £15,250, so i received £3,050 in to my SIPP for the first 20%.

Looking at the figures above, I appear to have still paid some higher rate tax, meaning that I didn't make enough pension payments to use up all of the 40% tax payments, but then if that's the case I was expecting to receive another £3,050 rebate back?

How can I receive £3,050 in to my SIPP for my first 20% but only £2,436.40 back in a cheque for the other 20% if I still paid some tax at 40%?

I would expect that the rebate would have been lower if I had run out of income taxed at 40%?

Judwin

Someone, either you or the tax office has stuffed up.


Your basic rate allowance has been extended by £12200 - which is what you physically paid in. It should have been extended by £15250 - which is the grossed up amount in the pension.


So either you filled in the tax return wrongly (entered the net rather than gross amounts in the relevant pension boxes). or the tax office have misunderstood what you told them.


How did you file your tax return - online or paper ?

mike5678

I did it by telephone. I told them what I paid and they said they would update accordingly, looks like another phone call needed then!

mike5678

Before I call them back, can anyone tell me me what my rebate should actually be, so I know they've understood what I tell them this time.

jem16

mike5678 wrote: »

Before I call them back, can anyone tell me me what my rebate should actually be, so I know they've understood what I tell them this time.

You actually paid too much into your pension for all of it to gain 40% tax relief. You should have paid in £13,269 gross which is £10,615.20 net.

So only £13,269 is due an extra 20% tax relief so £2653.80.

Basically you should tell them that you made a gross payment of £15,250.