Scottish income tax on pension contributions.

Apodemus

Sorry if this has been asked already, but what will the position be next year with SIPP payments for Scottish taxpayers? If basic rate will be 21%, will the SIPP provider add back all the basic rate tax paid and then anything that falls within the 41% range sorted as usual through the tax form. Or will the SIPP provider stay with the assumption of 20% tax paid, leaving the additional basic rate tax to be sorted out on the tax form along with anything charged at the 41% rate?

greatkingrat

https://www.gov.uk/government/publications/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-december-2017/pension-schemes-relief-at-source-for-scottish-income-tax-newsletter-december-2017

In theory the pension providers should be informed of the correct rate to use each year by HMRC, how well that will work in practice remains to be seen.

Apodemus

Thanks for that - hot off the press, it was only released yesterday!

So it looks like providers will be notified of the status for existing clients and be able to look up the status of new clients and apply the correct rate. But if they are not sure they apply the UK rate and it gets sorted out later by HMRC. A lot of extra work all round for 1% tax! No wonder there is a view that it will cost more than it raises!

davieg11

I'll do my bit and save them that extra cost by salary sacrificing by salary down to £24000.

Apodemus

davieg11 wrote: »

I'll do my bit and save them that extra cost by salary sacrificing by salary down to £24000.

Unfortunately the added cost of managing all this falls to others, rather than the SG themselves, so there was no incentive to them to retain a simple system. I’ll certainly be making sure that I don’t voluntarily pay the £650 extra tax (compared to the same salary in the rest of UK), if I can contribute to my pension instead.

RuleTheWorld

I am lucky to benefit from salary sacrifice and as '40% taxpayer' in Scotland it's getting almost too good to be true

100p in the pot only costing 57p from 1st April 2018.

When I have this opportunity I struggle to hear any arguments for mortgage overpayment, LISA or any other savings (assuming minimum pot already in place).

RuleTheWorld

RuleTheWorld wrote: »

I am lucky to benefit from salary sacrifice and as '40% taxpayer' in Scotland it's getting almost too good to be true

100p in the pot only costing 57p from 1st April 2018.

When I have this opportunity I struggle to hear any arguments for mortgage overpayment, LISA or any other savings (assuming minimum pot already in place).

And with earnings over the child benefit minimum its actually costing me less than 57p

tempus_fugit

Just wondering what this will mean for those of us with no income that put £2880 into a pension and get £720 tax relief. Will the amounts change and we'll only now get 19% relief?

resk

RuleTheWorld wrote: »

I am lucky to benefit from salary sacrifice and as '40% taxpayer' in Scotland it's getting almost too good to be true

100p in the pot only costing 57p from 1st April 2018.

When I have this opportunity I struggle to hear any arguments for mortgage overpayment, LISA or any other savings (assuming minimum pot already in place).

Yep, it's a no-brainer for me too. Salary sacrifice down to just under the higher rate band. I've evangelised this strategy a wee bit with colleagues, but they all think I'm mental for "locking the money away".

Asghar

Apodemus wrote: »

Thanks for that - hot off the press, it was only released yesterday!

So it looks like providers will be notified of the status for existing clients and be able to look up the status of new clients and apply the correct rate. But if they are not sure they apply the UK rate and it gets sorted out later by HMRC. A lot of extra work all round for 1% tax! No wonder there is a view that it will cost more than it raises!

Pension companies and platform providers will still only claim the 20% tax relief from HMRC, it will up to you to claim the extra 1% if entitled.

Apodemus

Asghar wrote: »

Pension companies and platform providers will still only claim the 20% tax relief from HMRC, it will up to you to claim the extra 1% if entitled.

Thanks, but are you sure? My reading of the link above is that the providers are to be given the information so that they can apply the correct rate - which would imply taking account of the 21% rate. Otherwise what is the purpose of them being informed? I can see that some providers might decide it is too much hassle to take this into account for a very small number of clients.

I’m not even sure how reclaiming on a SA form will work (unless they change the form)? IIRC, the form gives a single box for contributions on which no tax is refunded and that figure goes directly to the final calculation. They would need to add a specific category for contributions where tax has been partially refunded.

Of course, all this has still to pass Parliamentary scrutiny and may change before implementation.