Teacher - Tutoring takes salary into 40% - Pension tax relief?

liviboy

Hi all,

A friend of mine is a teacher (earning £36480 pa before tax and pension contributions). She also tutors and last year earned £14,500 gross in tutoring.

This makes her a 40% tax payer.

When completing her tax return for her tutoring, it asked for pension payments except those deducted before tax from her salary.

As the Teachers' Pension is deducted before tax from her salary then these payments weren't put onto the tax return.

Neither she nor I can see a section on the tax return for claiming 40% relief on her payments.

Can anyone help - is it possible to claim this additional relief and, if so, how does she do it?

AlanP_2

I think she might need to have her tax code split differently across the 2 employments so that her tutoring job uses enough to push her into HR tax on her teaching job.

Is the tutoring PAYE through an agency or is she self employed, easier to do above if on PAYE.

greenglide

As the Teachers' Pension is deducted before tax from her salary then these payments weren't put onto the tax return.

Neither she nor I can see a section on the tax return for claiming 40% relief on her payments.

If the pension payments are deducted before tax then this reduces the gross pay. There is then no tax relief to claim.



The total gross pay across both employments has been reduced by the pension payments which will reduce the higher rate tax. It is only pension payments made after tax that require the higher rate to be explicitly claimed (these will also show the standard rate added by the pension scheme).


Are you talking about a self assessment being completed?

xylophone

Is the tutoring done outside her normal teaching job as "self employment"?

Is she contributing to a pension outside TPS?

Linton

Pension contributions can either be taken before tax or after tax:
- If they are taken after tax you pay the contribution from taxed money and so you are due a refund of that tax.
- If your pension contributions are taken prior to tax your pay is effectively reduced by the amount of contribution and you are never charged tax on this money in the first place and so you do not need a refund. I believe the pay you show on the Self Assessment form is after the deduction of pension as given in your annual P60.



What is your friend's pension contribution and tax code for her teacher's salary? Has she been charged higher rate tax? AlanPs questions are also relevent.

liviboy

Hi all,

Thanks for the replies so far.

Her tutoring is “self employed” through a partnership (she is paid gross and gets a partnership tax return form and then completes a self assessment tax return.

She isn’t contributing to a pension scheme outside of the TPS.

Her pension contribution was: £3540 bringing her taxable salary to £32940.


I think I’ve maybe been a bit thick. Because her pension contribution was taken prior to BR tax being taken, this reduced her salary. Consequently she paid 40% tax on £3,540 LESS income from the tutoring (let’s say this to make life easier as I don’t have her exact calculation to hand). Therefore in effect she did get 40% relief because she didn’t pay tax on that £3,540 in the 40% band?

marlot

liviboy wrote: »

...a teacher (earning £36480 pa before tax and pension contributions). She also tutors and last year earned £14,500 gross in tutoring...

From April 2019, she won't be a 40% taxpayer any more as the threshold rises to £50k.

marlot

liviboy wrote: »

...Because her pension contribution was taken prior to BR tax being taken, this reduced her salary. Consequently she paid 40% tax on £3,540 LESS income.

That's correct.


Don't get too hung up on where the income has come from - at the end of the day, its all income that gets added together for tax purposes.

Robert_McGeddon

Hang on a second. Her taxable income from teaching seems to be £32,940 + £ 14,500 = £47,440. After deduction of (assumed) personal allowance £11,850 for (assumed) tax year 2018/19 her taxable income is £35,590, well below the higher rate threshold. So 40% tax should not be involved.

Now, if she has other taxable income then higher rate tax may come into play, but the OP has not mentioned any yet. Two more thoughts:
1 She could invest in a SIPP and get tax relief on the contributions, and
2 The self employed income £14,500 should be stated after all possible expenses and allowances have been taken - is it?

marlot

Robert_McGeddon wrote: »

Hang on a second. Her taxable income from teaching seems to be £32,940 + £ 14,500 = £47,440. After deduction of (assumed) personal allowance £11,850 for (assumed) tax year 2018/19 her taxable income is £35,590, well below the higher rate threshold....

There's an error there. Assuming the person is in England 47440 is just into higher rate...

Personal Allowance - Up to £11,850 @ 0%
Basic rate - £11,851 to £46,350 @ 20%
Higher rate - £46,351 to £150,000 @ 40%


But you're very right about expenses for the self-employed work. She should look to deduct travel etc.

GunJack

Robert_McGeddon wrote: »

Hang on a second. Her taxable income from teaching seems to be £32,940 + £ 14,500 = £47,440.

Not quite...salary from teaching was £36,480, so total income is more like £50,980. Minus £11,850 and pension conts (TPS approx, what, 8%?) call it £3400 for sake of argument, £15,250 leaves £35,730, so 40% tax only due on £1,230, less if the TPS %age is actually higher.