Pension contributions left off tax return

BingoBandit

In addition to his company pension, my brother has an old stakeholder pension that he's been paying into monthly for decades. It's not much, only about £700/year + tax relief.

He fills in self assessment due to having other income but has never listed the stakeholder pension on his tax return because he seemed to remember that an old accountant told him he didn't have to. He's a basic rate taxpayer, so not entitled to claim anything other than the 20% relief already claimed by the pension company.

He has had a one-off windfall and plans to pay a bit extra into his pension this year. He should be able to max out his annual allowance for 2019/20, plus possibly use some carry forward from last year. This is unlikely to reach anywhere near the leftover annual allowance, even including the omitted pension contributions.

Unless we're missing something, it seems like the overall tax situation and amount that he can pay in won't really be affected so there's minimal benefit to amending previous tax returns. It might gain him a bit more backdated child tax credit, but this would be offset by the charges his accountant would make to amend the returns (the accountant uses his own system to file our returns so we are not able to change them on HMRC's site ourselves).

Is he ok to just leave the previous returns as they are, or are there any other pitfalls in doing so?

Brynsam

He's a basic rate taxpayer, so the only tax relief available on his stakeholder contributions will be that claimed by the pension provider on his behalf and added to his stakeholder 'pot', whether resulting from this year's contributions or carry forward amounts. No need for him to do anything.

zagfles

BingoBandit wrote: »

In addition to his company pension, my brother has an old stakeholder pension that he's been paying into monthly for decades. It's not much, only about £700/year + tax relief.

He fills in self assessment due to having other income but has never listed the stakeholder pension on his tax return because he seemed to remember that an old accountant told him he didn't have to. He's a basic rate taxpayer, so not entitled to claim anything other than the 20% relief already claimed by the pension company.

What?? I'm pretty sure you can't choose to leave stuff off a tax return just because it'll make no difference to the calculation. Does he leave interest off as well because (if under £1000) it doesn't make any difference? Doesn't matter, still needs to be declared.

Sometimes pension contributions (if to a RAS scheme and in excess of relevant earned income) could point at excess tax relief being claimed. Probably not the case here, but one of the reasons it needs declaring.

He has had a one-off windfall and plans to pay a bit extra into his pension this year. He should be able to max out his annual allowance for 2019/20, plus possibly use some carry forward from last year. This is unlikely to reach anywhere near the leftover annual allowance, even including the omitted pension contributions.

What is the windfall, earned income (eg employment, self employment) or unearned (eg gift, inheritance)?

If unearned then he'll need to watch out for the 100% of earnings limit on pension contributions (this is separate and nothing to do with the annual allowance, and there's no carry forwards). Your gross contributions can't be more than 100% of "relevant earnings".

Unless we're missing something, it seems like the overall tax situation and amount that he can pay in won't really be affected so there's minimal benefit to amending previous tax returns. It might gain him a bit more backdated child tax credit, but this would be offset by the charges his accountant would make to amend the returns (the accountant uses his own system to file our returns so we are not able to change them on HMRC's site ourselves).

Was this accountant unaware of the pension contributions? Didn't he ask? If he did the tax return he should have, so I'd say it's his mistake so how can he seriously charge to rectify it?

Is he ok to just leave the previous returns as they are, or are there any other pitfalls in doing so?

Speak to the accountant. They should ensure tax returns are correct if they file them. As well as child tax credit, it might affect student loans etc if relevant (they use income from 2 years back), and other stuff that uses taxable/adjusted net income to assess.

Paul_Herring

He should be able to max out his annual allowance for 2019/20, plus possibly use some carry forward from last year.

Only if his gross salary for this year is going to be more than the amount he's planning to contribute....

The 'basic rate taxpayer' suggests he's not earning over £50K, so is he even earning over £40K?