Can anyone clarify?

Jaguar_Skills

I needed some advice on my transactions page of my personal pension. I have it through Cavendish which uses Fidelity.

Basically I have been putting in £600 per month since I started £300 into Blackrock and £300 into Vanguard. These have all shown up on my transactions as purchase payment with the relevant amount.

Having looked at the last couple of days, there is a purchase payment of £75 to each of them and I have no idea why? Is this the tax relief that is being added? It is all a bit confusing.

Also as a higher rate tax payer how do I claim the additional tax relief? Does this get done automatically through HMRC

xylophone

For every £80 you pay into your pension, you receive £20 in tax relief which is claimed by the provider - it would seem that Cavendish/Fidelity prefunds?

With regard to higher rate relief, you need to claim this through HMRC.
https://www.fidelity.co.uk/static/pdf/personal/pensions/sipp/fidelitysipp-tax-factsheet.pdf

jem16

Jaguar_Skills wrote: »

Having looked at the last couple of days, there is a purchase payment of £75 to each of them and I have no idea why? Is this the tax relief that is being added? It is all a bit confusing.

Sounds like it. Tax relief is 25% of the net payment and 25% of £300 is £75.

Also as a higher rate tax payer how do I claim the additional tax relief? Does this get done automatically through HMRC

You will need to phone HMRC and let them know that you are making contributions into a pension and wish to claim higher rate tax relief. Make sure you tell them the gross amount - ie £750 and not the net amount that you actually contribute. They would then probably adjust your tax code to give you the tax relief.

This can also be done via your tax return if you complete one.

Aretnap

Jaguar_Skills wrote: »

Having looked at the last couple of days, there is a purchase payment of £75 to each of them and I have no idea why? Is this the tax relief that is being added? It is all a bit confusing.

Sounds like it. Your payment of £300 should be topped up by £75 to give you 20% tax relief (ie the total contribution will be £375 - 80% of which comes directly from you)

Also as a higher rate tax payer how do I claim the additional tax relief? Does this get done automatically through HMRC

No, you need to tell HMRC about the contributions, either by including them on your tax return at the end of the year (if you do one) or by phoning them and asking them - they'll send you a cheque and/or adjust your tax code to take the contributions into account in future.

jamesd

Tell HMRC that you're making gross pension contributions of £750 a month including the basic rate tax relief and they will tell your employer to use a different tax code that will give you the tax relief during the year. Phone or letter is fine for doing this.

Jaguar_Skills

Thanks all.

bigadaj

Good luck with phoning them, impossible to get through.

I ended up writing and am still awaiting for the tax code amendment.

jem16

bigadaj wrote: »

Good luck with phoning them, impossible to get through.

Ring before 8am and you should get through.

mgdavid

agreed, it's usually no problem up until about 8.30-ish.

FatherAbraham

jem16 wrote: »

You will need to phone HMRC and let them know that you are making contributions into a pension and wish to claim higher rate tax relief. Make sure you tell them the gross amount - ie £750 and not the net amount that you actually contribute. They would then probably adjust your tax code to give you the tax relief.

I would never advise phoning HMRC to report this. I once tried it, and as a result, they added my pension contributions to my income, reducing my tax code and increasing my PAYE, since they misunderstood my pension contributions to be pension income I was receiving.

Writing a letter is far simpler, easier, straightforward, and one can easily retain a copy of one's declaration.

Warmest regards,
FA

jem16

FatherAbraham wrote: »

I would never advise phoning HMRC to report this. I once tried it, and as a result, they added my pension contributions to my income, reducing my tax code and increasing my PAYE, since they misunderstood my pension contributions to be pension income I was receiving.

As they would normally tell you the new tax code over the phone - ask them if they don't - it should have been pretty straightforward to pick up any misunderstanding.

Writing a letter is far simpler, easier, straightforward, and one can easily retain a copy of one's declaration.

Warmest regards,
FA

As HMRC usually takes at least 8 weeks to even look at the letter I would always phone. The tax code would be changed instantly and a P2 Coding Notice sent out.

If it's more complicated like claiming tax relief for a lump sum contribution made to a Defined Benefit scheme, writing can be best.