Personal pension relief on lump sum payment

236dave

Hi All,
Can anyone help, I want to make a lump sum payment to my personal pension to offset any 40% tax liability.

Facts:
2018-19 tax year - projected. (Live in England)
Earnings incl benefits (co.car + medical) = £69,758

What size lump sum payment to offset 40% tax liability?

Previous tax Year 2017-18 facts:
Earnings incl benefits (co. car + medical) = £63,172
I paid £14,560 into my pension which was grossed upto £18,200 (basic rate relief),
then my tax code was adjusted, which is currently 1274L, for remaining tax relief.

Hope someone can advise.
Thanks
Dave

Linton

Further info required...

1) Are your "earnings" the gross figure before any payments you make to your employers pension?
2) Are you paying anything into your employers pension which would reduce your gross taxable earnings? If not why not!
3) Are you in Scotland?
4) Does your tax code differ from the standard 1185L purely because of your personal pension contributions or are there any other reasons for the difference?

Dazed_and_confused

then my tax code was adjusted, which is currently 1274L, for remaining tax relief.

If you are referring to your 2018:19 tax code then it was definitely not adjusted to allow any remaining tax relief due 2017:18.

HMRC do not allow pension tax relief for one year in the tax code of another year.

Any pension tax relief in your 2018:19 tax code will be a provisional amount for 2018:19 on the assumption that you will be making similar payments in 2018:19 to those made in 2017:18.

Have you received a calculation for 2017:18 to include any pension relief due?

236dave

Linton wrote: »

Further info required...

1) Are your "earnings" the gross figure before any payments you make to your employers pension?
2) Are you paying anything into your employers pension which would reduce your gross taxable earnings? If not why not!
3) Are you in Scotland?
4) Does your tax code differ from the standard 1185L purely because of your personal pension contributions or are there any other reasons for the difference?

Hi Linton,
Thanks for helping!
I did make a mistake, sorry.

1) + 2)
Here is a break down:
I make salary sacrifice payments to my employers pension.
My 2018-19 earnings are:
£60,300 (projected after salary sacrifice)
£7712 (BIK for co. car)
£630 (BIK for medical cover)
Total = £68,642
btw - I owe £446 in tax from a previous tax year.

3) I'm in England

4) Purely down to pension contributions.

Hope you can advise.
Thanks
Dave

Dazed_and_confused

btw - I owe £446 in tax from a previous tax year.

4) Purely down to pension contributions.

How is the £446 being paid back if not through your 2018:19 tax code?

236dave

Dazed_and_confused wrote: »

If you are referring to your 2018:19 tax code then it was definitely not adjusted to allow any remaining tax relief due 2017:18.

HMRC do not allow pension tax relief for one year in the tax code of another year.

Any pension tax relief in your 2018:19 tax code will be a provisional amount for 2018:19 on the assumption that you will be making similar payments in 2018:19 to those made in 2017:18.

Have you received a calculation for 2017:18 to include any pension relief due?

Hi,
Personal pension relief figures from tax notifications:
2017-18 (18.03.2018) £9,100
2018-19 (13.07.2018) £8,557
2019-20 (Jan 2019) £7,171

The £446 is being paid back through my coding, I have an adjustment figure of £1116, in my January tax notification.
Dave

Linton

236dave wrote: »

Hi Linton,
Thanks for helping!
I did make a mistake, sorry.

1) + 2)
Here is a break down:
I make salary sacrifice payments to my employers pension.
My 2018-19 earnings are:
£60,300 (projected after salary sacrifice)
£7712 (BIK for co. car)
£630 (BIK for medical cover)
Total = £68,642
btw - I owe £446 in tax from a previous tax year.

3) I'm in England

4) Purely down to pension contributions.

Hope you can advise.
Thanks
Dave

Ok my first go, ignoring the tax debt....
Assuming your "clean" tax allowance is £11850 and you have no other income:
1) Higher rate tax starts at £11850+£34501=£46351
2) Without personal pension contributions you pay higher rate tax on £68642-£46350=£22292
3) So you should make a total gross personal pension contribution in 2018/19 of £22292=£17832 net.

Is there any danger that with your SS and your employers contributions you would breech the £40K limit? It seems unlikely but....

Dazed_and_confused

The £8,557 included in the 2018:19 notification (a tax code I presume) is nothing to do with 2017:18 tax relief.

It is simply allowing some provisional tax relief for 2018:19 based on the amounts you declared for 2017:18.

The actual amounts in the notification are probably decreasing simply because there is less higher rate relief due as the amount of Personal Allowance and basic rate band increase each year.

Have you received a P800 calculation for 2017:18 or did you file a Self Assessment return for 2017:18. That is where you will see the actual tax relief due for 2017:18, not in your 2018:19 tax code.

4) Purely down to pension contributions.

This doesn't make sense. 1274L is far too low a code for it to just have Personal Allowance and pension relief (of £8,557).

Are you sure it doesn't also include your car and medical benefit? That would make 1274L more likely.

236dave

Linton wrote: »

Ok my first go, ignoring the tax debt....
Assuming your "clean" tax allowance is £11850 and you have no other income:
1) Higher rate tax starts at £11850+£34501=£46351
2) Without personal pension contributions you pay higher rate tax on £68642-£46350=£22292
3) So you should make a total gross personal pension contribution in 2018/19 of £22292=£17832 net.

Is there any danger that with your SS and your employers contributions you would breech the £40K limit? It seems unlikely but....

Thanks Linton,
My salary sacrifice is only £173/month.
Employers contribution £240/month.

Confirmation - to offset my 40% tax liability, I need to pay £17,832 into my personal pension, which will get grossed up to £22,292, with basic tax relief.
I should then get the remaining tax relief via my PAYE tax coding in 2019-20 tax year.

Have I got this right?
Thanks for all your help!
Dave

236dave

Dazed_and_confused wrote: »

The £8,557 included in the 2018:19 notification (a tax code I presume) is nothing to do with 2017:18 tax relief.

It is simply allowing some provisional tax relief for 2018:19 based on the amounts you declared for 2017:18.

The actual amounts in the notification are probably decreasing simply because there is less higher rate relief due as the amount of Personal Allowance and basic rate band increase each year.

Have you received a P800 calculation for 2017:18 or did you file a Self Assessment return for 2017:18. That is where you will see the actual tax relief due for 2017:18, not in your 2018:19 tax code.



This doesn't make sense. 1274L is far too low a code for it to just have Personal Allowance and pension relief (of £8,557).

Are you sure it doesn't also include your car and medical benefit? That would make 1274L more likely.

Hi, Yes it does include BIK's, for co. car and medical cover.
Hope this clarifies the coding.
Thanks
Dave

AnotherJoe

236dave wrote: »

Thanks Linton,
My salary sacrifice is only £173/month.
Employers contribution £240/month.

Confirmation - to offset my 40% tax liability, I need to pay £17,832 into my personal pension, which will get grossed up to £22,292, with basic tax relief.
I should then get the remaining tax relief via my PAYE tax coding in 2019-20 tax year.

Have I got this right?
Thanks for all your help!
Dave

Or you could just ask for it to be paid back direct to you.
I hated all this moving of last years tax owing or refunded into next years as it became impossible to understand what the heck was going on.

I either paid the extra, or got an immediate payment each time, much cleaner.