Utilising last three years allowance

redmalc

Morning All
I am coming to that time of life when pension payments are very important,due to retire in 2021.
Please advise if I need to inform HMRC it’s my intention to pay 75K into my pension this tax year, which will take up the 40 K allowance from this tax year and utilise the majority of the unused allowance from the previous last three years.
My salary this year will be 108K

Thanks

Dazed_and_confused

No, you don't have to tell them that you intend to pay it.

You will have to file a Self Assessment return and show the pension payment on the return (but not anything about the carry forward, just keep a record should they ever ask for details of how you have exceeded £40k).

You can if you want notify them during the year and get an updated tax code although that won't prevent you having to file the Self Assessment return and notify them again on that.

An important thing to note is that they may update your 2020:21 tax code to include tax relief based on the payment of £75k. This is not allowing tax relief for the £75k, it is an assumption you will pay the same amount again in 2020:21. If that happens you should get the tax code changed asap as you will end probably end up owing a lot of tax if you just leave it.

SMcGill

I did just this a few weeks ago. As it’s above £10k they won’t deal with it over the phone so I wrote to HMRC with evidence of my payment and a letter asking for tax adjustment with respect to a single contribution of £x gross. They will do everything else, including checking your current salary and using carry forward.

I left sending this until after my contribution hit my pension as this gave time for my provider to claim the basic 20% relief, so HMRC had that evidence already.

I can see from my gov.uk gateway that they received my letter mid Aug and the system says I should have a response by the end of Sept, so that should give you an idea of how long it will take.

redmalc

Thanks for the responses I paid the additional by salary sacrifice of an annual bonus

Dazed_and_confused

I think you have got confused.

The whole point of salary sacrifice is that you don't pay anything into the pension. Your employer pays it.

You are not entitled to any pension tax relief on those contributions and most definitely shouldn't tell HMRC about them.

If you don't already file a Self Assessment tax return then you quite possibly won't need to. You would if your taxable salary was £108k but your taxable salary will only be £33k. So unless HMRC send you a return or you have another reason to need to file one Self Assessment may not be required.

redmalc

Dazes and confused the bonus payment was additional to my salary of 108k

Dazed_and_confused

Ok you will need to file a Self Assessment return but you don't show the pension payment your employer made on it, you don't notify HMRC now and you don't get any pension tax relief on that pension contribution.

You simply pay less tax and National Insurance because your taxable pay is only £108k not £183k.

Dazed_and_confused

And I think you might be best off looking at something like AJ Bell's Guide to Annual Allowance Tapering.

Just Google it, I can't add a link sorry.

BoxerfanUK

SMcGill wrote: »

I did just this a few weeks ago. As it’s above £10k they won’t deal with it over the phone so I wrote to HMRC with evidence of my payment and a letter asking for tax adjustment with respect to a single contribution of £x gross. They will do everything else, including checking your current salary and using carry forward.

I left sending this until after my contribution hit my pension as this gave time for my provider to claim the basic 20% relief, so HMRC had that evidence already.

I can see from my gov.uk gateway that they received my letter mid Aug and the system says I should have a response by the end of Sept, so that should give you an idea of how long it will take.

I hope you have better luck than us!

We wrote to HMRC to claim back higher rate relief after making a lump sum pension payment of £21,045.33. Pension provider added basic relief of £5,261.33 taking the total to £26,306.66 leaving £5,261.33 to come back from HMRC. After about 5 weeks we got a letter from HMRC acknowledging that we had made a gross pension PAYMENT of £5,261.33!!!!!!!

We couldn't have made the letter we sent any clearer but they still cocked it up, so now on advice from them over the phone we've had to send yet another letter :mad:

Dazed_and_confused

It would be highly unusual to get exactly the amount of tax relief as the basic rate relief allowed at source.

There is no additional pension tax relief due, the gross contribution simply increases the amount of basic rate tax relief you can pay. Which in turn reduces any higher rate tax payable.

So in an incredibly simple scenario where you have paid enough higher rate tax and paid exactly the right amount of tax to the penny it could be £5261.33 but if you are an employee this is very unlikely.

How much was your total taxable income in 2018:19?

NB. None of that excuses poor administration from HMRC but I'm not sure you will get the outcome you are expecting even when they get the figures right.

BoxerfanUK

Dazed_and_confused wrote: »

It would be highly unusual to get exactly the amount of tax relief as the basic rate relief allowed at source.

There is no additional pension tax relief due, the gross contribution simply increases the amount of basic rate tax relief you can pay. Which in turn reduces any higher rate tax payable.

So in an incredibly simple scenario where you have paid enough higher rate tax and paid exactly the right amount of tax to the penny it could be £5261.33 but if you are an employee this is very unlikely.

How much was your total taxable income in 2018:19?

NB. None of that excuses poor administration from HMRC but I'm not sure you will get the outcome you are expecting even when they get the figures right.

Hello D&C, so how much would you estimate is due back then? Threshold income was £132,303.38
Adjusted income £144,187.28
Salary sacrifice took earnings below 100K so no loss of tax code or tapering.