Higher rate tax relief on pension contributions

Doc_Dunning

Hi,

My first post here, so I'm hoping that someone will be able to help. My question relates to claiming higher rate tax relief from HMRC, in relation to a one-off cash contribution I made to my pension pot. I've changed the amounts here, to keep them simple.

So my salary is £47500, and higher rate tax kicks in at £37500.

I paid £12000 into my pension pot, and the provider added back the 20% basic rate relief (£3000) so that my gross contribution was £15000. All good so far.

Now I claim the higher rate relief from HMRC, expecting a further £3000. But no - they tell me that I am only allowed higher rate relief on £10000, not £15000. This (they say) is because my salary is only £10000 over the higher rate threshold.

Is that right? I've not seen it documented anywhere that tax relief on contributions is limited like that. If it is right, am I able to use some allowance from an earlier tax year, or is that something else that I'm thinking of?

Prism

Thats right. You can only claim tax relief on tax you actually paid. So thats £2000 in your case.

Using allowance from a previous year (carry forward) is when you want to contribute more than £40k in a single year. I assume that doesn't apply here

AnotherJoe

Doc_Dunning wrote: »

Now I claim the higher rate relief from HMRC, expecting a further £3000. But no - they tell me that I am only allowed higher rate relief on £10000, not £15000. This (they say) is because my salary is only £10000 over the higher rate threshold.

Is that right? I've not seen it documented anywhere that tax relief on contributions is limited like that. If it is right, am I able to use some allowance from an earlier tax year, or is that something else that I'm thinking of?

Yep. If it wasn't the case, you could earn 1p over the high rate threshhold and get the full 40% back on everything !


Now yes you can add in more to make up for amounts below the max that you didnt pay in previous years, but they still relate to this years tax, eg if you missed on putting in money above the HRT last year, you cant retrospectively get that back this year. Also, you are limited to £40k or whatever you earn this year whichever is the higher. So in your case £47k but I presume you arent up for that, and in any case you still wouldnt get any more HR relief anyway.

Marcon

Doc_Dunning wrote: »

Hi,

My first post here, so I'm hoping that someone will be able to help. My question relates to claiming higher rate tax relief from HMRC, in relation to a one-off cash contribution I made to my pension pot. I've changed the amounts here, to keep them simple.

So my salary is £47500, and higher rate tax kicks in at £37500.

I paid £12000 into my pension pot, and the provider added back the 20% basic rate relief (£3000) so that my gross contribution was £15000. All good so far.

Now I claim the higher rate relief from HMRC, expecting a further £3000. But no - they tell me that I am only allowed higher rate relief on £10000, not £15000. This (they say) is because my salary is only £10000 over the higher rate threshold.

Is that right? I've not seen it documented anywhere that tax relief on contributions is limited like that. If it is right, am I able to use some allowance from an earlier tax year, or is that something else that I'm thinking of?

Yes, it's right. Think about it: you have only paid higher rate tax on £10,000, so how could you claim higher rate relief on anything more than that?

dano17439

Hang on, if you earn £47,500 and presuming your tax code is 1250L, then you wont be able to claim any higher tax relief in 2019/20


£47,500 less £12,500 tax free = taxable income of £35,000 = under the £37,500 20% allowance = £0 tax payable at 40%

onomatopoeia99

dano17439 wrote: »

Hang on, if you earn £47,500 and presuming your tax code is 1250L, then you wont be able to claim any higher tax relief in 2019/20


£47,500 less £12,500 tax free = taxable income of £35,000 = under the £37,500 20% allowance = £0 tax payable at 40%

I was wondering about that as well, the OP seemed to ignore the personal allowance in their calculations for some reason.

Can people really earn that much an not understand the fundamentals of income tax?

Albermarle

I was wondering about that as well, the OP seemed to ignore the personal allowance in their calculations for some reason.

According to what the OP said , the taxman seems to have made the same mistake !
Unless for some reason he has a zero personal allowance.

Marcon

Albermarle wrote: »

According to what the OP said , the taxman seems to have made the same mistake !
Unless for some reason he has a zero personal allowance.

Read the post again, particularly: 'I've changed the amounts here, to keep them simple.'

Prism

Albermarle wrote: »

According to what the OP said , the taxman seems to have made the same mistake !
Unless for some reason he has a zero personal allowance.

I assumed a company car was involved

westy22

Doc_Dunning wrote: »

Hi,

I've changed the amounts here, to keep them simple.

Depending on how much the OP changed them by might actually have complicated the question :rotfl:

Doc_Dunning

Thanks everyone for your replies.

You're right of course about the way I presented my numbers. I probably should have said 'taxable pay' rather than 'salary'. Anyway, you've confirmed the situation and I've learned something more about the way things work. It's a tad annoying that there's no explanation of this on HMRC's web pages where they discuss tax relief on pension contributions. Or maybe there is and it's just well hidden.