Pension contributions above annual earnings

rdansie

I understand you can't claim tax relief on pension contributions above your earnings in that tax year. I also understand that if your annual contributions exceed 40k you will have to pay tax on anything over the 40k.

What I'm unclear on is if you can contribute more than your annual salary without claiming tax relief on it (below 40k). What I would want to do is contribute more than my annual earnings but tell my sipp provider not to claim tax relief on the excess. According to the Hargreaves Lansdown website it's not possible to contribute more than your annual earnings, however, I'm not sure if this is their rule, of if that's the rules from HMRC/UK government. Judging by the link below, it should be possible. Is there another pension provider I could use that would allow this? Or could I just overpay and retrospectively tell Hargreaves Lansdown that I've contributed too much and they would be forced to make the necessary corrections on the tax relief (or I could even repay the excess tax relief directly to HMRC).

(I was unable to post the link - the document t I'm referring to is called "Tell HMRC you’ve claimed too much relief at source for pension scheme members")

xylophone

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions

You can put as much as you want into your pension, but there are annual and lifetime limits on how much tax relief you get on your pension contributions.

It may well be that pension scheme systems are set up to claim tax relief so that they will not accept ineligible contributions.

Aside from that, why would you wish to contribute more to your pension than yields tax relief?

If you are a high earner, why not consult an IFA who could advise you on how to save for retirement outside your pension while mitigating your tax bill as much as legally possible?

Albermarle

It would probably be easier to put any extra above earnings, into a S&S ISA .
You could use the same investment funds that are in your pension if you stay with the same provider.

Linton

Albermarle wrote: »

It would probably be easier to put any extra above earnings, into a S&S ISA .
You could use the same investment funds that are in your pension if you stay with the same provider.

Yes, use an S&S ISA or even invest outside an ISA if you have maxed out. Without the tax relief you will be taxed on pension contributions and again on money withdrawn from the pension beyond the tax free 25% and what remains of your tax allowance after SP and any other retirement income. This seems seriously bad planning.

Sea_Shell

On a similar thought, What happens if you accidentally put in more than you're allowed by just a few hundred pounds, say under £200??

Basically via two separate plans.

When would it all "come to light" that a fraction too much tax relief has been claimed (invested)?

Are there any penalties, or would the taxman or one of the pension providers, request the money back?

jamesd

xylophone wrote: »

why would you wish to contribute more to your pension than yields tax relief?

Pension money is not normally part of a person's estate so there can be an inheritance tax benefit.

Sea_Shell wrote: »

What happens if you accidentally put in more than you're allowed ... When would it all "come to light" that a fraction too much tax relief has been claimed (invested)? ... Are there any penalties, or would the taxman or one of the pension providers, request the money back?

You tell the pension company and they pay you a refund of excess contributions lump sum. Someone could make big contributions early in a year and find that changed circumstances have made those too high. It'll probably take HMRC a few years to notice on their own.