Tax relief twice on pension

dc197

Hello Team
Grateful for some advice on the following.
I’m a 40% tax payer and have a corporate pension, into which both I and my employer add funds. My own contribution is deducted on my payslip and I shows up as a reduction in the gross before tax is calculated.
A couple of months ago a colleague who has his own private pension (not our corporate one) told me that I am entitled to additional pension contributions from HMRC because I am a 40% tax payer. I asked HMRC for this and now my pension statements shows my employee contribution as normal but now with an extra 25% “tax relief” adjustment from HMRC.
However I now think this is wrong. I think what my colleague told me only applies to him as his contributions are already taxed, and he adds to his pension using his net pay. Mine however are from my gross pay. I think I am not entitled to the additional relief directly into my pension from HMRC, as I already benefit from the relief as per my wageslip.
Is my understanding correct? Shall I ask HMRC to stop adding this, or do I need to ask my pension provider?
Please note this was a genuine mistake which I am now trying to rectify, I’m not here for a telling off.
Thanks
N

xylophone

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

sandsy

dc197 wrote: »

Mine however are from my gross pay. I think I am not entitled to the additional relief directly into my pension from HMRC, as I already benefit from the relief as per my wageslip.
Is my understanding correct? Shall I ask HMRC to stop adding this, or do I need to ask my pension provider?

I believe your understanding is correct, based on what you've told us.

I think HMRC needs to be your first port of call.

Paul_Herring

From what you've said your understanding is correct.

Your colleague gets tax relief because his contributions have incurred income tax (and national insurance, but he can't get that back.)

You don't get relief, because your contributions weren't taxed in the first place. (You benefit over your colleague in that you don't pay NI on the sums contributed either so what NI you would have paid goes into your pension. Your employer, incidentally, doesn't pay their 13.8% NI on the amount either. More enlightened employers also add this saving to the contribution but not all do.)

Tax relief is payment back of taxes that have been paid*. Not something that automatically get applied to contributions regardless of source.


* An exception is on the £2,880 non-employed people can contribute, or an employed person contributing the whole of their salary into a pension - specifically the band between £0 to the tax-free allowance. (~£10K)

dc197

Thank you all.
I called hmrc and they do not have any record of this, except for a previous tax year.
Sounds like my pension provider has our of date info. I'll try them next.

jem16

Paul_Herring wrote: »

You don't get relief, because your contributions weren't taxed in the first place. (You benefit over your colleague in that you don't pay NI on the sums contributed either so what NI you would have paid goes into your pension. Your employer, incidentally, doesn't pay their 13.8% NI on the amount either. More enlightened employers also add this saving to the contribution but not all do.)

From the tax point of view, that is correct. However from a NI point of view that is only correct if Salary Sacrifice is involved which the OP hasn't mentioned.

It is possible to pay pension contributions from gross salary and Salary Sacrifice not being involved. In fact it sounds like Salary Sacrifice is not involved as OP mentions employee and employer contributions.

nb0825

I'm in the same situation, whereby my pension is a salary sacrifice scheme.

I contribute 4% of my GROSS salary before tax and my employer also contributes 4%. As already mentioned, the benefit of this, over tax relief, is my NI contributions are reduced. The government is apparently annoyed by this as higher earners who are nearing retirement could effectively salary sacrifice say 50% of their income and reduce their NI by a huge amount