Tax relief for buying NHS Additional Pension and paying lump sum

Jan_the_pensioner

Many thanks for your comments and suggestions. I will try several more times as you suggested and will request them to consider my application as 'Concessional Relief'. If no luck, I will go through a complaints process. I will try both calling them and webchat which may be better with sharing the link. I will let you know when I have an outcome.

Jan_the_pensioner

Dear All,
I want to share the good news with you that yesterday I finally managed to speak with a senior tax officer who took the reference numbers you shared to locate the information on Concessional Relief in their handbook. She called me back few hours later to confirm that I can get back the tax I paid last year. I am very happy about  this outcome and want to thank you as I could never ever get back the tax relief for the additional pension contribution I made, without your advice.
Thanks a million!

xylophone

I want to share the good news with you

Very many thanks for your courtesy!  Good news indeed and a post to bookmark for further queries on this point.

NedS

xylophone said:

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.

Apologies for bumping an old thread, but my situation is very similar, but with a slight twist.

I have read all the information in this thread, and in the related https://forums.moneysavingexpert.com/discussion/4043989/please-help-with-nhs-pension-purchase-and-tax-relief/p1  All great advice/discussion and also relevant to my situation, thank you.

I'm in the CS Alpha scheme and I currently purchase Added Pension by monthly contributions direct from my salary, so everything's great, I get tax relief under Net Pay arrangements.

However, I'd like to increase my contributions such that not all of my contributions will be receiving relief under net pay arrangements. Based upon my current salary, I can make additional contributions of around £1000 month from my salary and that is covered by the amount of tax I would normally pay, reducing my gross salary to my tax free allowance resulting in zero tax paid. However, I'd like to increase my monthly contributions to £1500, meaning about £1000 of that would receive relief under net pay arrangements but the remaining £500 would not have received any relief.

Given how much difficulty posters have claiming tax relief on lump sum contributions (which should be relatively straight forward for HMRC to understand), am I opening a can of worms for myself trying to explain this to HMRC to claim the tax relief on the remaining £500/month contributions where some of my monthly contributions have received relief under net pay but not all? I'd be looking at doing this for the next 4 years to max out my added pension.

Any advice gratefully received.

hugheskevi

NedS said:

I'd like to increase my contributions such that not all of my contributions will be receiving relief under net pay arrangements. Based upon my current salary, I can make additional contributions of around £1000 month from my salary and that is covered by the amount of tax I would normally pay, reducing my gross salary to my tax free allowance resulting in zero tax paid.

However, I'd like to increase my monthly contributions to £1500, meaning about £1000 of that would receive relief under net pay arrangements but the remaining £500 would not have received any relief.

Given how much difficulty posters have claiming tax relief on lump sum contributions (which should be relatively straight forward for HMRC to understand), am I opening a can of worms for myself trying to explain this to HMRC to claim the tax relief on the remaining £500/month contributions where some of my monthly contributions have received relief under net pay but not all? I'd be looking at doing this for the next 4 years to max out my added pension.

Do you have other taxable income?

If not, you cannot get tax relief under net pay arrangement if you do not pay tax.

NedS

hugheskevi said:

NedS said:

I'd like to increase my contributions such that not all of my contributions will be receiving relief under net pay arrangements. Based upon my current salary, I can make additional contributions of around £1000 month from my salary and that is covered by the amount of tax I would normally pay, reducing my gross salary to my tax free allowance resulting in zero tax paid.

However, I'd like to increase my monthly contributions to £1500, meaning about £1000 of that would receive relief under net pay arrangements but the remaining £500 would not have received any relief.

Given how much difficulty posters have claiming tax relief on lump sum contributions (which should be relatively straight forward for HMRC to understand), am I opening a can of worms for myself trying to explain this to HMRC to claim the tax relief on the remaining £500/month contributions where some of my monthly contributions have received relief under net pay but not all? I'd be looking at doing this for the next 4 years to max out my added pension.

Do you have other taxable income?

If not, you cannot get tax relief under net pay arrangement if you do not pay tax.

No, no other taxable income, and I appreciate I will not be receiving relief under net pay arrangements on a portion of my monthly contributions (£500/month). My question is how easy (or hard!) is it going to be to explain this to HMRC and get the tax relief via a rebate payment from HMRC?

hugheskevi

NedS said:

No, no other taxable income, and I appreciate I will not be receiving relief under net pay arrangements on a portion of my monthly contributions (£500/month). My question is how easy (or hard!) is it going to be to explain this to HMRC and get the tax relief via a rebate payment from HMRC?

Unless I am really misunderstanding something here, your taxable income will be <=£12,570 (ie within your Personal Allowance) based on a £1,000 p/m Added Pension purchase via net pay arrangement.

You would not be due any tax relief on an additional £500 p/m contribution, be it under net pay arrangement or direct contact with HMRC. The only way you can get relief on pension contributions when your taxable income is within your Personal Allowance is to make a pension contribution under a Relief-at-Source arrangement, which is not used for Added Pension purchases.

Dazed_and_C0nfused

NedS said:

hugheskevi said:

NedS said:

I'd like to increase my contributions such that not all of my contributions will be receiving relief under net pay arrangements. Based upon my current salary, I can make additional contributions of around £1000 month from my salary and that is covered by the amount of tax I would normally pay, reducing my gross salary to my tax free allowance resulting in zero tax paid.

However, I'd like to increase my monthly contributions to £1500, meaning about £1000 of that would receive relief under net pay arrangements but the remaining £500 would not have received any relief.

Given how much difficulty posters have claiming tax relief on lump sum contributions (which should be relatively straight forward for HMRC to understand), am I opening a can of worms for myself trying to explain this to HMRC to claim the tax relief on the remaining £500/month contributions where some of my monthly contributions have received relief under net pay but not all? I'd be looking at doing this for the next 4 years to max out my added pension.

Do you have other taxable income?

If not, you cannot get tax relief under net pay arrangement if you do not pay tax.

No, no other taxable income, and I appreciate I will not be receiving relief under net pay arrangements on a portion of my monthly contributions (£500/month). My question is how easy (or hard!) is it going to be to explain this to HMRC and get the tax relief via a rebate payment from HMRC?

What tax relief do you think you are entitled to on the £500 portion?

As far as I can see from what you have posted no relief will be due.

Do you understand the difference between relief at source, where tax paid doesn't always matter, and net pay contributions?

NedS

hugheskevi said:

NedS said:

No, no other taxable income, and I appreciate I will not be receiving relief under net pay arrangements on a portion of my monthly contributions (£500/month). My question is how easy (or hard!) is it going to be to explain this to HMRC and get the tax relief via a rebate payment from HMRC?

Unless I am really misunderstanding something here, your taxable income will be <=£12,570 (ie within your Personal Allowance) based on a £1,000 p/m Added Pension purchase via net pay arrangement.

You would not be due any tax relief on an additional £500 p/m contribution, be it under net pay arrangement or direct contact with HMRC. The only way you can get relief on pension contributions when your taxable income is within your Personal Allowance is to make a pension contribution under a Relief-at-Source arrangement, which is not used for Added Pension purchases.

OK, I didn't realise that - thank you. I though ALL contributions were entitled to tax relief (assuming you do not exceed annual gross earnings and the £40k annual allowance). I'm currently getting relief when paying into my SIPP under Relief-at-Source arrangement but had wanted to shift my contributions more towards buying added pension, but it sounds like that is not a good idea if I won't get any tax relief on the additional contributions - better to limit it to contributions that take my taxable income down to my personal tax allowance which to get relief.

So using your reasoning above, if a part time Civil Servant in Alpha earns £12k per year, they would not be entitled to tax relief on their contributions whereas a colleague doing the same job, working a few more hours and earning £15k per year (above their personal tax allowance) would be entitled to relief? I guess that limits the benefit of reducing my hours to 2 days per week.

And just so I understand, in the NHS example above where the OP had made a lump sum contribution of around £40k, they would have had earnings of at least £40k + £12,500 to be able to apply for a tax rebate.

hugheskevi

NedS said:

So using your reasoning above, if a part time Civil Servant in Alpha earns £12k per year, they would not be entitled to tax relief on their contributions whereas a colleague doing the same job, working a few more hours and earning £15k per year (above their personal tax allowance) would be entitled to relief? I guess that limits the benefit of reducing my hours to 2 days per week.

Correct. Although the tax relief for someone earning £15,000 is only £11.50 per month.

NedS said:

And just so I understand, in the NHS example above where the OP had made a lump sum contribution of around £40k, they would have had earnings of at least £40k + £12,500 to be able to apply for a tax rebate.

They could apply for a rebate if their taxable income was above their Personal Allowance (eg £13,000) in which case they would be due relief, but the maximum amount of tax rebate possible is the amount of tax paid,. so to get tax relief on the full amount would require taxable earnings equal to Personal Allowance plus £40,000.