Payments into pension scheme

Andypandyboy

I may be in a position to pay a lump sum into my pension. I am a higher rate taxpayer. Would I get tax relief on the money at 20% or 40%? If the latter, is it automatic or do I need to claim it back?

atush

You will get basic rate relief automatically with your pension provider. You need to contact HMRC and tell them about it.

They can send a cheque if you wait and do it thru self assessment. Or they can adjust your tax code and then take less tax out going forwards.

jem16

Andypandyboy wrote: »

I may be in a position to pay a lump sum into my pension. I am a higher rate taxpayer. Would I get tax relief on the money at 20% or 40%?

That all depends on what type of pension you are paying into. If it's a private pension, then 20% relief would be applied by the provider and you claim the other 20% from HMRC assuming you have enough income being taxed at 40%.

If it's a company pension it could be totally different. It may be the full 40%, only 20% or indeed none at all for lump sums and you have to claim from HMRC.

What kind of pension is it and will you be paying through salary or cheque?

Andypandyboy

Thanks.

So, I would get 40% tax relief overall? So, for arguments sake if I paid in £50,000 what would be the figure actually going into pension? I am just trying to see if I have got the gist of this or the wrong end of the stick!

It is a company pension and it is a bonus payment that I am considering having the company pay straight into my pension.

jem16

Andypandyboy wrote: »

Thanks.

So, I would get 40% tax relief overall?

Depends on how much you actually earn. You will only get 40% tax relief on the amount you actually pay 40% tax on.

So, for arguments sake if I paid in £50,000 what would be the figure actually going into pension?

You can't pay £50k into your pension as £40k is the annual limit. You would need to use Carry Forward to allow this. If you did have this you would need to be earning at least £92k this tax year to get tax relief at 40% on all of it.

However even if you could the answer will vary depending on the type of pension scheme you are using and how the payment is to be made.