Pension tax relief

paganmanwales

I don't have the P60 to hand, but I would imagine that £3549 was the tax I paid. I was lead to believe I would receive relief on the full £29598, but I am beginning to think this was wrong!

Dazed_and_confused

Based on your figures you needed to contribute £17,748 to get all the tax you paid back.

paganmanwales

Yes, I actually contributed more than £17748, I actually contributed £40000. I didn't have a charge to pay as I had unused allowance from previous tax years.

Dazed_and_confused

If you had only paid £3,549 in tax though what made you think you could get more than that back?

paganmanwales

For example, The tax relief calculator at Which? gives a figure for the relief as £5919, not £3549


or am I misunderstanding this complex matter!

Dazed_and_confused

That calculator looks to be referring to a "relief at source" contribution.

You didn't make that type of contribution, the route you opted for meant tax relief (on this specific contribution) was limited to the tax you actually paid.

Also, if you only earned £31k I'm not sure how you are allowed to contribute £40k in the first place?

xylophone

Also, if you only earned £31k I'm not sure how you are allowed to contribute £40k in the first place?

I think the OP has become confused by the carry forward rules.

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

If you are using carry forward to make larger pension contributions, you will only receive tax relief on total contributions that you pay into your pension scheme(s) that do not exceed your earnings in the tax year that you pay them.

Therefore if he did make an excess contribution, part of it was not tax relievable.

As far as I can make out, he would already have received some tax relief on his normal contribution through "net pay" as operated by NHS scheme.

He then had the situation where as member of a scheme operated on the net pay basis, he wanted to pay a gross contribution that could not be supported by the earnings in his final pay period so that relief could not be given through "net pay" in the normal way. He therefore had to apply to HMRC.

HMRC would look to the tax he actually paid on the £29,598 so that his refund was limited to no more than that amount.....I think...

Linton

swindiff wrote: »

That is not correct, you can get tax relief on all your earning upto £40k, including what may be covered by the personal tax allowance

Only if you make your contributions from taxed pay (eg to a personal pension) when HMRC will add a tax refund of 25% of the contribution (ie 20% of gross).



Most large employers will deduct pension contributions from gross pay and then calculate tax. HMRC are not involved. So you only get a reduction in the tax you would have paid rather than a refund of tax you did not pay. Salary Sacrifice has much the same effect.

paganmanwales

Looks like the refund I received was correct. Thanks for the input folks.