Pension How to pay for tax pusposes

bbarroso

Wondering if there is a correct way to pay into a pension, so as to make it tax deductible with HMRC.

Do I simply go into my pension provider and ask to make a payment or do I need to make an arrangement with my employer so they can deduct it themselves before I am paid?

Many Thanks

kinger101

You could have done some basic research using Google before posting.

Your employer should have a scheme. Unless you're under 22, or earn less than £192 per week, you should already have been enrolled.

If under £192 per week, you employer should still enrol you into their scheme at your request, and pay into the scheme (in addition to your contributions) provided you earn more than £116. You'd pay in 5%, the employer 3%.

If they have a salary sacrifice scheme, then they'll reduce your pay 5%. Otherwise, they'll deduct it straight from your wages. The former option is better as it saves you some NI as well.

Presuming you're a basic rate tax payer, you needn't do anything further or inform the HMRC.

Private pensions and SIPPs auto collect basic rate tax autormatically on your behalf.

bbarroso

I searched on Google, but could not find an answer. Elaborating below:

I am enrolled on a pension scheme provided by my employer and there are agreed deductions already taking place at whatever max rate they allowed me to do so. Throughout the year, however, I was offered (or rather forced to take) a company car which topped my actual income tax by a significant amount. Unaware of the tax liabilities, I did not inform HMRC timely and will now incur an additional payment.

I am looking to see how to make additional payments into my pension to levy me of some of the additional tax but I don't see an option on my provider website on how to pay, so looking into what options I have.

Hope this clarifies the query. Peace.

kinger101

OK. If you cannot pay in any more into your employers scheme, you need to set up a private scheme, such as a SIPP. Toward the end of the tax year, you can calculate how much tax your expect to pay, and make a contribution to the SIPP to drop yourself back into basic rate tax.

If you're going to have £2K of income taxed at 40%, your make a contribution of £1,600 to the SIPP. The SIPP provider would reclaim basic rate tax on your behalf. You'd then need to reclaim the other 20% (£400) back from HMRC.

The tax year for 2018/2019 ended yesterday (5th April), so that ship has already sailed I'm afraid. But hopefully you're forewarned for this year, and may wish to make regular contributions leading up to the lump sum if you have a fairly good idea what your taxable income will be for 2019/2020.

gdrforest

if its an employer scheme, then most likely you can pay extra contributions through your payroll. Your HR/Payroll department should have a form for it.

Marcon

bbarroso wrote: »

Wondering if there is a correct way to pay into a pension, so as to make it tax deductible with HMRC.

Do I simply go into my pension provider and ask to make a payment or do I need to make an arrangement with my employer so they can deduct it themselves before I am paid?

Many Thanks

Depends what sort of scheme your employer offers. If it's a (group) personal pension or NEST, then any personal contributions are made from net pay (i.e. after you've paid tax) and the pension provider reclaims basic rate tax on your behalf. If you are a higher rate tax payer, you can claim further relief via your self assessment tax return (unless you are a VERY high earner, but doesn't sound as if you fall into that bracket).

Does that set up/terminology ring any bells? If so, doesn't matter if you have extra contributions deducted from your salary or you pay them direct.

Dazed_and_confused

Throughout the year, however, I was offered (or rather forced to take) a company car which topped my actual income tax by a significant amount. Unaware of the tax liabilities, I did not inform HMRC timely and will now incur an additional payment.

I am looking to see how to make additional payments into my pension to levy me of some of the additional tax but I don't see an option on my provider website on how to pay, so looking into what options I have.

None as far as pension tax relief is concerned.

Any pension contributions paid from today onwards can only impact your 2019:20 tax liability. Not the 2018:19 tax year which appears to be the year you are concerned with.

Also, if you contribute to a "relief at source" scheme this does not reduce your taxable income. It increases the amount of basic rate tax you can pay. Which in turn can reduce any higher rate tax which might be payable.