Tax relief for buying NHS Additional Pension and paying lump sum

Jan_the_pensioner

Dazed_and_C0nfused said:

The amount of tax relief will depend on your taxable income in the year you made the contribution.  

Can you give us an idea of what you earned (taxable pay that would be shown in your P60) in the tax year you made the contribution in?  And was that wage your only source of taxable income?

In 2019/20 Tax year, I earned £35,880 (gross).  
£4,674 tax was deducted from this amount.
£3,645 was deducted as an employee annual contribution to 1995 NHS Pension scheme.
I paid lump sum of £41,840 (10 years savings from my taxed income) to NHS Pension in November 2019 to buy £2,000 worth of additional pension.
I did not receive any pension tax relief in the past years.

Dazed_and_C0nfused

I'm afraid your tax relief is limited to £4,674 with this type of contribution.  

xylophone

Hi, I am an NHS 2015 scheme member and have bought additional pension by lump sum twice in the past, and also had the runaround from HMRC.

When you come to think of it, this is very hard to understand since the CS Pension Scheme ( of which HMRC staff are presumably members) has this to say concerning the purchase of AP.

Tax relief  You will receive tax relief on contributions made through your payroll. So a contribution of, for example, £100 would have a net cost to you of £80, if you pay income tax at the standard rate (or £60 if you pay tax at the 40% rate). To receive tax relief, if you buy added pension by cheque, you will need to tell HM Revenue & Customs about your contribution and explain you did not receive any tax relief from the pension scheme in relation to the added pension purchase.

And LGPS https://www.lgpsmember.org/arm/already-member-extra.php#:~:text=If you are in the,£7,194 of extra pension.&text=If you wish to spread,like your normal pension contributions. If you wish to buy extra pension by paying a one-off lump sum, you can do so either via your pay or by making payment directly to your pension fund. If you choose to make payment directly to your pension fund, you will need to arrange tax relief directly with HMRC as the contributions are not being deducted from your pay. You can do this via your self assessment tax return or by calling or writing to HMRC. Tax relief is available on all pension contributions up to 100% of your taxable earnings. And TPS  Can I claim Tax Relief on the additional contributions I pay?  You’ll normally receive tax relief through the PAYE system if you pay by instalments. You’ll need to speak to the tax office about tax relief if you make a lump sum payment.  If you wish to claim tax relief for a one-off lump sum payment for a specific tax year, the payment must be received by Teachers’ Pensions before 5 April of the relevant tax year.

There is usually no need whatsoever to complete a Self Assessment return in this situation but you do need to be careful how you explain this to HMRC as it relatively rare when compared to relief at source contributions.

 Can it really be that rare when LGPS/TPS/NHS/CS offer the purchase of additional pension?

hugheskevi

xylophone said:

Can it really be that rare when LGPS/TPS/NHS/CS offer the purchase of additional pension?

I don't have statistics, but only a very small percentage of members choose to purchase additional pension, the overwhelming majority of members just make normal contributions and don't do anything else with their pension.

Of those that do buy additional pension, my experience is that the vast majority of those choose to contribute either a percentage of salary or fixed amount through payroll each month. So I think it ends up being not that many who decide to make lump sum contributions. But I don't have any stats to back that up, just anecdotal.

xylophone said:

To receive tax relief, if you buy added pension by cheque,

I do find it astonishing that in 2020 the only payment method for lump sum is by cheque. I doubt many younger members in particular even have a chequebook.

tibbles209

 Can it really be that rare when LGPS/TPS/NHS/CS offer the purchase of additional pension?

You wouldn't think it would be an issue, but it took me several months, 3 letters (where I very clearly stated I had purchased NHS additional pension, paid by lump sum via cheque, for which I had received no tax relief to date and thus was claiming the full 41% (Scottish) higher rate tax relief) and finally a phone call before they finally got it right. In total I have five different P800s for the tax year ending April 2020, only the last of which is correct, all because of the additional pension purchase. 

xylophone

The question does keep turning up like a bad penny......another one
https://forums.moneysavingexpert.com/discussion/6034555/pension-tax-relief


https://webarchive.nationalarchives.gov.uk/20110617043205/http://www.hmrc.gov.uk///pensionschemes/faqs/taxrel.htm
There used to be specific HMRC guidance - I wonder where it is in the latest HMRC Pensions Manual?

Public Sector Schemes

• I have paid a lump sum contribution into my scheme. Am I entitled to tax relief and if so how do I obtain it?
• 
  

Dazed_and_C0nfused

It is mentioned here although I suspect this manual is more about the practical rather than technical

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye93090

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye130025#IDA0H2PE

xylophone

It is mentioned here although I suspect this manual is more about the practical rather than technical

I see what you mean....but to the extent that this guidance is available, why the  ignorance of procedure  so often displayed (it would appear) by HMRC employees?

Cancri

I have done this in the past and had no issues.

I simply wrote to HMRC after the end of the tax year with the confirmation letter from the pension team confirming receipt of the lump sum payment, a copy of my P60 (yes I know they should have the information, but belt and braces), and a request for them to recalculate the tax I should have paid and to send me a cheque for the refund. A few weeks late the refund turned up.

xylophone

Good to have a positive  report.

There really shouldn't be a problem

https://webarchive.nationalarchives.gov.uk/20110617043205/http://www.hmrc.gov.uk///pensionschemes/faqs/taxrel.htm

but a look back over previous posts indicates that there too often is.