Higher rate tax relief on pension contributions - salary sacrifice

thickasabrick

Just off the phone with HMRC to claim higher rate tax relief on my pension contributions.

Didn't go quite as well as expected,the person was reluctant to process my claim.
Wanted my P11D , fair enough but seemed to think that I should be claiming back HRT relief on the total of the salary sacrifice + normal contributions and insisted that I "double check".

I'm pretty sure I didn't pay *any* tax on the salary sacrificed portion so don't need to claim any form of relief on it.

Figures simplified and contributions separated between pension plans for explanation purposes

2 pension plans, company pension plan and SIPP.

1.
£10000 through salary sacrifice paid into company pension plan directly by my employer.

2.
£6660 paid into my SIPP from net income
£1665 SIPP provider added basic rate tax relief
So total £8325 gross contribution to my SIPP (keeping it below the £10000 figure for claiming by phone/letter)

P60 pay total for year is showing: total renumeration - salary sacrifice amount

So I only need to claim back the difference between basic tax relief and higher rate tax relief on the gross contribution from my net income.

Is my understanding correct ?

BoGoF

You are correct. Unfortunately HMRC have people answering the phone after a couple of weeks 'training'

Albermarle

£1665 SIPP provider added basic rate tax relief

You should get back £1665 in HRT relief as a tax refund, so you will have to phone them back and hopefully get a more experienced person.
Be aware that the system will automatically adjust your tax code for this year on the assumption you will make the same contribution to your SIPP this year.

thickasabrick

Making some progress...
Received a letter from HMRC and they have clarified that the figures they were referring to in the telephone call were all related to the SIPP contribution (from net salary). So the salary sacrifice part is correct and not included in the calculations for tax relief.

I had called them just before the end of the tax year (31st of March) to claim tax relief on the SIPP contribution. They had made a note then but had told me to call back after the 21st of April as it was too late for it to be processed in the current tax year.

I remember clearly saying that I had contributed £6660 from my net salary and the SIPP pension provider had added basic rate tax relief of £1665 so the gross contribution was £8325.

The letter stated
"The £10406 is the £8325 payment made to your SIPP pension provider grossed up to include the 20% relief given to you at source".

So now it looks like I need to phone them again to make sure the "grossed up amount" is the £8325 figure.

Dazed_and_confused

Sounds like hard work!

I think it would be simpler to avoid any mention of the salary sacrifice contribution though as no tax relief is due in respect of those contributions. Because you haven't made them, your employer does.

There is no pension tax relief with salary sacrifice. The tax relief comes by virtue of you not having the income needing to be taxed in the first place.

bowlhead99

thickasabrick wrote: »

I remember clearly saying that I had contributed £6660 from my net salary and the SIPP pension provider had added basic rate tax relief of £1665 so the gross contribution was £8325.

The letter stated
"The £10406 is the £8325 payment made to your SIPP pension provider grossed up to include the 20% relief given to you at source".

So now it looks like I need to phone them again to make sure the "grossed up amount" is the £8325 figure.

Yes, you should give them a call to correct what's in their letter as presumably the letter reflects what they put through their system (though some funny admin error may mean the system is fine and the letter is rubbish - stranger things have happened)

They will have so many people calling them up to declare their info in different ways over the course of the day - and with some of the callers misunderstanding the process and needing to be corrected etc; it's entirely possible that the person you spoke to had just been talking to another 'customer' who had been describing their affairs differently, (gross of basic relief instead of net, or net cost of contribution after HMRC refund etc) and so they accidentally recorded the figure you said against the description they were working with for some previous caller.

If you'd filled in a standard self assessment tax return online or short tax return, the one figure you would put in the box as your private pension contribution would just be 'the contribution and basic rate relief' being the aggregated amount, £8325, which ended up inside the SIPP, with no need to mention the £6660. But over the phone they must get people trying to give them all sorts of figures, because people calling them are not doing their own 'return' and have not added on the tax relief in advance, so the operator probably gets used to just doing that for them unthinkingly.

jaybeetoo

Just do it all online - no need to call them.

thickasabrick

Choices from "Tax on your private pension contributions" are
You can claim tax relief on your Self Assessment tax return for:
20% if you pay Income Tax at 40%
25% if you pay Income Tax at 45%
You can also call or write to HMRC to claim if you pay Income Tax at 40%.

My finances are/were about as simple as you can get, PAYE, basic bank account and everything else in tax wrappers (Company Pension/SIPP/S&S ISA) so calling or writing appears to be the simplest solution for me as I pay income tax at 40%. My total lump sum pension contributions are below the £10000 limit for calling.

From a post on here by Mr Saver "Call HMRC for Claiming Pension Tax Relief"
Online alternative was always "All webchat advisers are busy at the moment."

jaybeetoo wrote: »

Just do it all online - no need to call them.

thickasabrick

Tax has been refunded to me now.
Follow the script in the post by Mr Saver "Call HMRC for Claiming Pension Tax Relief.
Be absolutely clear that the figure you are providing is the total contribution to your personal pension excluding basic rate tax relief by your pension company and then let HMRC add the basic rate tax relief to the total before calculating the refund.

thickasabrick wrote: »

Choices from "Tax on your private pension contributions" are
You can claim tax relief on your Self Assessment tax return for:
20% if you pay Income Tax at 40%
25% if you pay Income Tax at 45%
You can also call or write to HMRC to claim if you pay Income Tax at 40%.

My finances are/were about as simple as you can get, PAYE, basic bank account and everything else in tax wrappers (Company Pension/SIPP/S&S ISA) so calling or writing appears to be the simplest solution for me as I pay income tax at 40%. My total lump sum pension contributions are below the £10000 limit for calling.

From a post on here by Mr Saver "Call HMRC for Claiming Pension Tax Relief"
Online alternative was always "All webchat advisers are busy at the moment."

BoxerfanUK

thickasabrick wrote: »

Tax has been refunded to me now.
Follow the script in the post by Mr Saver "Call HMRC for Claiming Pension Tax Relief.
Be absolutely clear that the figure you are providing is the total contribution to your personal pension excluding basic rate tax relief by your pension company and then let HMRC add the basic rate tax relief to the total before calculating the refund.

Hi, My DW needs to do the same and claim higher rate relief we are just waiting for her P11D to enclose a copy along with her P60 when she writes to HMRC.

She paid a single contribution via bank transfer (not salary sacrifice) to her Royal London Pension at the end of March of £21,045.33 and RL added basic rate relief of £5,261.33 bringing the total to £26,306.66 so are you saying to enter £21,045.33 in the letter and exclude the basic rate relief figure added by RL? Bit confused now as I thought she had to put the total with basic rate relief included (£26,306.66)

BoxerfanUK

BoxerfanUK wrote: »

Hi, My DW needs to do the same and claim higher rate relief we are just waiting for her P11D to enclose a copy along with her P60 when she writes to HMRC.

She paid a single contribution via bank transfer (not salary sacrifice) to her Royal London Pension at the end of March of £21,045.33 and RL added basic rate relief of £5,261.33 bringing the total to £26,306.66 so are you saying to enter £21,045.33 in the letter and exclude the basic rate relief figure added by RL? Bit confused now as I thought she had to put the total with basic rate relief included (£26,306.66)

Could anyone clarify re my question in the last paragraph please?