Tax relief on pensions

ALADINSANE

I have contributed a £1000 into my sipp and have been given £250 tax relief 
I thought tax relief was 20% so that would £200 tax relief
can any explain 

JoeCrystal

If you contribute £1000 net into your pension scheme then yes, the tax relief would be £250, so it is £1250 gross, so 20% tax relief of £1250 is £250. To get £200 tax relief (assuming you are Basic Rate taxpayer), then contribute £800 net will get £200 tax relief to gross up to £1,000.

BoGoF

It's 20% of the gross amount, £1250 @ 20% = £250.

xylophone

For every £80 you contribute to the SIPP, TR of £20 is claimed.
1000/80 =  12.5.
12.5 x 20 = 250.

Paul_Herring

20% of gross == 25% of net.

gross: £100, 20% of that is £20.

net: (£100-£20) £80. 25% of that is £20.

SonOf

The examples above are correct.
Pension tax relief is not a bonus. It is a relief.    So, you made a pension contribution of £1250.  20% of £1250 is £250.  So, you paid £1000.  The £250 tax relief arrives approx 6 weeks later if you use a provider that does not prefund.

Coveredinbees!!!!

Sorry to gate crash this but I can't get his to add up, if I pay 100 and get tax releif on that at 20%. So on my £100 I would have paid £20 so how come I get £25 not 20. I'm not complaining if they want to give me more money that's fine.

Paul_Herring

Coveredinbees!!!! said:

Sorry to gate crash this but I can't get his to add up, if I pay 100 and get tax releif on that at 20%. So on my £100 I would have paid £20 so how come I get £25 not 20. I'm not complaining if they want to give me more money that's fine.

If you get paid (gross) £125, you will pay 20% tax of £25, leaving you with £100 to put into your pension.

When you put that £100 into your fund, you get relief on that of 25% (not 20%) of what you're putting in to put you back in your original position.

If you're talking about the gross amount (In your packet before tax. In your pension after reliefs.) you use a 20% deduction to get net.

If you're talking about the net amount (In your bank after tax. What you put into your pension before relief.) you use a 25% of that figure to get back to the gross.

Coveredinbees!!!!

Yea I get it now 20% of £125 is £25 which leaves £100, so I get back that 20%. I wasn't thinking about it properly.

mcooke999

In order to get paid £1000 you've got to earn £1250 and pay £250 in tax (20%)... The government is basically giving you the tax back they took from you before you paid it into your pension.

Dazed_and_C0nfused

mcooke999 said:

In order to get paid £1000 you've got to earn £1250 and pay £250 in tax (20%)... The government is basically giving you the tax back they took from you before you paid it into your pension.

Completely untrue.

You do not need to have paid any tax to get basic rate tax relief on a relief at source pension scheme.

Lots of people on here with no pensionable earnings are contributing £2,880 and getting £720 tax relief added to their fund.