Advice re tax refund on lump sum AVC

Mark__H

I would be so grateful if somebody could offer advice re obtaining tax refund (or is it tax relief? - I’m not sure) on a lump sum AVC contribution.
My situation is as follows:
I’m a higher rate tax payer, leaving my employer through voluntary redundancy very shortly.
I’m getting a lump sum VR payment of just under the £30k tax free threshold.
I am in my employers DB pension scheme. I’m looking to make a lump sum AVC investment of c£70k before I leave, which will be through an AVC scheme offered by my employer but will not be going through payroll due to time constraints.
I have sufficient Annual allowance carried forward to make a larger lump sum but I believe I am restricted by taxable earnings in the current tax year, hence I’ve settled on the £70k figure.

What I’m really struggling to understand is exactly how much tax relief/refund I’ll get and how it is obtained. As I see it, after personal allowance, I’ll have paid 20% tax on £35k =£7k and 40% tax on c£25k = £10k.
From what I’ve read it seems pretty clear that the higher rate tax is eligible for refund (although how this happens I’m unclear) but I’m not sure about the basic rate tax I’ve paid.
PS. I’ve never had to complete a tax self -assessment form.
Could anybody assist my understanding of my situation?
Thanks in advance

AlanP_2

You could check with the AVC Provider (not your employer, Standard Life or whoever it is with) for their position.

Generally I would expect the BR 20% to be added by the Provider through a reclaim from HMRC with you contacting HMRC for the HR relief which will either be through code adjustment or a refund.

Remember to take off the AA value of your DB pension pot for this tax year before working out how much AA you have available and how much taxable income you have this tax year.

Your £70k contribution would be Grossed up to £87,500 with the BR reclaim by the Provider and that is the figure that counts towards your AA.

Not sure whether £70k or £87.5k counts as the contribution level against relevant income but I'm sure someone will be along who knows and can reply.

mgdavid

You can do a self-assessment at the end of the tax year, or just ring HMRC and talk to them if you want it sooner.

Dazed_and_confused

I’m looking to make a lump sum AVC investment of c£70k before I leave, which will be through an AVC scheme offered by my employer but will not be going through payroll due to time constraints.

From previous threads on here and the Cutting Tax board this is highly likely to complicate matters.

First thing you need to establish (from the pension company not HMRC) is exactly what type of pension contribution this will be?

If you get basic rate tax relief through the pension company then are you paying £70,000 which will be grossed up to £87,500 or is the £70,000 the gross figure so you only pay £56,000.

In this situation the pension payment increases the amount of basic rate tax you can pay which in turn reduces the 40% tax payable.

For example gross payment including basic rate relief of £70,000 means your basic rate threshold moves from £35,000 to £105,000 (if you have that much income).