40% Tax code relief

SpeedSouth

Hi,

Just wandering if someone can confirm my tax code revision for me? I've read the other thread but it seems either its wrong or I'm failing to grasp (most likely).

I've over contributed to the pension for the year to maximise the relief, (as I worked it out based on what I would earn accounting for the 3 weeks before 5th April, rather than actual payment in the tax year).

I've contributed £10,737 gross for the year assuming a £52k Salary.

In actual fact given the 3 weeks won't count I'll only earn £50,209 so have over contributed to the tune of around £4k gross. That's fine, not ideal but still live and learn.

But having just told them my contributions they have increased my Tax code to 1445, so roughly £4,000 extra in tax free income.

To my mind that means I will receive in effect an £800 refund during the next tax year.

However I've already paid £8818 in tax this year.

But if we assume I should have only ever have paid 20% tax on £33, 206 that equates to £6641.20, meaning I'm due £2,200 back?

Next year I will be using salary sacrifice with a new employer so wont get myself messed up next year.

Forgive the long post but hopefully it makes sense?

SpeedSouth

It's just dawned on me maybe they've assumed next year I will make £45k again so roughly £2.5k at 40% so £1000 touch in tax savings which would bring it closer adding that to the £800. Not £2200 still though.

In actual fact because I'm salary sacrificing I won't pay any at 40%. I guess they need my estimated new salary for next year of £40k

CLAPTON

how much did you actually pay into your pension fund?
presumably this is paid from taxed pay?

SpeedSouth

I paid in £8589 of real money after taxed pay

LXdaddy

adam81 wrote: »

I've over contributed to the pension for the year to maximise the relief, (as I worked it out based on what I would earn accounting for the 3 weeks before 5th April, rather than actual payment in the tax year).

I've contributed £10,737 gross for the year assuming a £52k Salary.

In actual fact given the 3 weeks won't count I'll only earn £50,209 so have over contributed to the tune of around £4k gross.

I'm confused by the opening. You say you've "over contributed" and you say you contributed £10,737 gross from a salary of £52K.

That doesn't sound like an over contribution - you are allowed to contribute up to your earned income or £40K (ignoring for the moment any carry forward of unused allowance from previous years) £10,737 is certainly not an over contribution.

The issue with the three weeks not counting is maybe you have a monthly pay date around the middle of the month so you will get paid on the 15th April so what you earned between 15 March to 5th April doesn't count in this year.

So if you discount your salary payable in mid-April you say only earned £50,209 and have over contributed £4K gross. I'm not seeing what you say as over contribution.

SpeedSouth

When I say over contributed, I've not breached the limit. I simply didn't need to put in so much to have received the full 40% relied. I could have made a lesser contribution but still maxed the 40% relief.

Because as you say I'm not paid those 3 weeks salary during this tax year.