Utilising last three years allowance

BoxerfanUK

BoxerfanUK wrote: »

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:

ADVICE REQUIRED please - particularly the bit in red font
Well, It seems HMRC have cocked up again as they have now written a second letter with an additional rebate of £3,156.80, which, by my calculation is still just over 1K short !! New figures for second calculation in blue

Income £90,738.43 income tax £25,335.60
Medical insurance £1,591.00
Untaxed interest £34.00 (now £39.00)

Less personal allowance £11,850.00
total taxable income £80,513.43 (Now same)

Personal savings all' @ 0% INCOME £34.00 (Now £39.00) INCOME TAX £0
Basic rate @ 20% on INCOME £39,762.00 (Now £55,546.00) INCOME TAX £7,952.40 (Now £11,109.20)
Higher rate @ 40% INCOME £40,717.00 (Now £24,933.00) INCOME TAX £16,286.80 (Now £9,973.20)
TOTAL INCOME £80,513.00 (Now same) INCOME TAX £24,239.20 (Now £21,082.40)
Total tax payable £24,239.20 (Now £21,082.40)
Tax you've already paid £25,335.60 (Now - same)
HMRC owes you £1096.40 (Now 'tax already repaid to you for the year (£1,096.40)
(Now HMRC owes you £3156.80)

Page 3 Explanation ''Your actual private pension contribution'' £5,262.00 (Now £21,046.00)

HIGHER RATE RELIEF
''We have increased the amount of tax you pay at basic rate from £34,500.00 to £39,762.00 to give you higher rate relief for pension contributions'' (Now ''We have increased the amount of tax you pay at basic rate from £34,500.00 to £55,546.00 to give you higher rate relief for pension contributions'')

Surely in this second letter the basic rate increase should read as £39,673.00 to £60,808.00 as the first letter already increased the basic rate from £34,500 to £39,762.00 In the two separate calculations they have started at £34,500 BOTH TIMES!

MEDICAL INSURANCE
Medical insurance you paid tax on £1,476.00 (same)
Your actual medical insurance £1,591.00 (same)

As said earlier, the gross pension contribution was £26,306.66 and not £5,262

By my calculation they still owe me over 1K

Dazed_and_confused

I suspect the £34,500 is correct. What needs to be changed is the increase i.e. the section below still seems wrong from what you have posted

Page 3 Explanation ''Your actual private pension contribution'' £5,262.00 (Now £21,046.00)

SMcGill

@BoxerfanUK

I’m sorry to hear about your ongoing problems with HMRC. Your wish for me to have more luck seems to have worked as I’ve just received my new tax code and they’ve increased my tax free allowance by £12,500. I didn’t honestly understand this as my contribution was £25,000 so I called and they assured me this will result in my paying £5,000 less in tax this year. I hope you have better luck next time too.

jamesd

So:

Salary sacrificed £40,088.95 on which no additional relief is payable because higher rate was delivered when sacrificing.

Lump sum pension payment of £21,045.33 into personal pension before tax relief adds 25%, 5261.33, to take it to 26306.66. Initial expectation is that your basic rate band will be increased by 26306.66 to get you the higher rate relief on this.

1014T tax code to tax the 1476 BIK seems odd to me because I don't see how 1476 subtracted from 11850 delivers 10149. How did you end up with a 11625 initial personal allowance? I assume that hey may have assumed some lost personal allowance for income over 100k. I see BIK was really 1591. And that they then started with an unreduced personal allowance of 11850, removing the over 100k reduction. 11850 - 1591 = 10259 for tax code, untaxed interest doesn't reduce that further because it's within your 500 personal savings allowance.

34500 was the basic rate band in 2018-19 and so it's the starting point assuming this is the 2018-19 tax year. Add 26306.66 of gross pension contributions and you get to 60806.66 before rounding to deliver you the required higher rate relief.

They wrote "We have increased the amount of tax you pay at basic rate from £34,500.00 to £55,546.00 to give you higher rate relief for pension contributions'". 555546 - 3450 = 21046 so they wrongly used your net pension contribution of 21,045.33 instead of the gross including basic rate relief of 26306.66. Tell them this and ask them to further revise up your basic rate band to 60806.66 before rounding.

When telling HMRC about lump sums paid to relief at source schemes always tell them the gross including basic rate relief, not the net. I don't know what you said to them but if you tell them net they probably won't gross it up and this is the resulting error.

BoxerfanUK wrote: »

Surely in this second letter the basic rate increase should read as £39,673.00 to £60,808.00 .. In the two separate calculations they have started at £34,500 BOTH TIMES!

Yes, it should and they will and should start at 34500 every time for 2018-19.

What's happened is simple enough to handle by phone: "Basic rate band increase used net instead of gross amount of the pension contribution". They will ask for gross and do a new calculation.

BoxerfanUK

Dazed_and_confused wrote: »

I suspect the £34,500 is correct. What needs to be changed is the increase i.e. the section below still seems wrong from what you have posted

Page 3 Explanation ''Your actual private pension contribution'' £5,262.00 (Now £21,046.00)

D&C hope you don't mind I've sent you a PM

BoxerfanUK

jamesd wrote: »

So:

Salary sacrificed £40,088.95 on which no additional relief is payable because higher rate was delivered when sacrificing.

Lump sum pension payment of £21,045.33 into personal pension before tax relief adds 25%, 5261.33, to take it to 26306.66. Initial expectation is that your basic rate band will be increased by 26306.66 to get you the higher rate relief on this.

1014T tax code to tax the 1476 BIK seems odd to me because I don't see how 1476 subtracted from 11850 delivers 10149. How did you end up with a 11625 initial personal allowance? I assume that hey may have assumed some lost personal allowance for income over 100k. I see BIK was really 1591. And that they then started with an unreduced personal allowance of 11850, removing the over 100k reduction. 11850 - 1591 = 10259 for tax code, untaxed interest doesn't reduce that further because it's within your 500 personal savings allowance.

34500 was the basic rate band in 2018-19 and so it's the starting point assuming this is the 2018-19 tax year. Add 26306.66 of gross pension contributions and you get to 60806.66 before rounding to deliver you the required higher rate relief.

They wrote "We have increased the amount of tax you pay at basic rate from £34,500.00 to £55,546.00 to give you higher rate relief for pension contributions'". 555546 - 3450 = 21046 so they wrongly used your net pension contribution of 21,045.33 instead of the gross including basic rate relief of 26306.66. Tell them this and ask them to further revise up your basic rate band to 60806.66 before rounding.

When telling HMRC about lump sums paid to relief at source schemes always tell them the gross including basic rate relief, not the net. I don't know what you said to them but if you tell them net they probably won't gross it up and this is the resulting error.

Yes, it should and they will and should start at 34500 every time for 2018-19.

What's happened is simple enough to handle by phone: "Basic rate band increase used net instead of gross amount of the pension contribution". They will ask for gross and do a new calculation.

Hi Jamesd, just seen your post, yes I think that's what I'm trying to get at but HMRC are confusing the hell out of me over this.... which is really not difficult.
In the letter I did break the payment down in terms of the payment made AND the 25% uplift, but I stated to them VERY CLEARLY that the gross contribution for claiming higher rate relief was £26,306.66

Tearing my hair out.

EDIT: There seems to be a difference each year with the tax code as the BIK never seems accurate and then gets changed later and they adjust the tax code.

Yes 2018/19 tax year.

BoxerfanUK

Update: I spoke to HMRC this morning and they have agreed the calculation was wrong (for the second time) and are sending out a revised statement so fingers crossed this time and at least it looks like I am not going to have to sit down and write a long drawn out missive over it.

Thanks again D&C and Jamesd :beer: