Over pay pension

mattysgsg

If I exceed allowed annual allowance by £50k lump sum payment, but did not claim tax relief, is there additional tax to pay. Assume tax relief would have been 40% if claimed, and 40% would be the rate paid if a tax charge was due.

NottinghamKnight

Tax relief is pretty much always applied though, either through relief at source or by the provider reclaiming 20%. Pension payments need to be from earned income and 40% is available only on the part on which you pay 40%, so earnings over £100k in this instance. Contact your provider and HMRC to clarify and confirm required actions.

MallyGirl

Are you exceeding by £50k or exceeding by £10K due to a £50k payment?
do you earn enough in this tax year to contribute this much?
do you have any unused allowance from previous years that you could carry forward?

mattysgsg

I'm exceeding by £50k from savings, CF already used up. Lump-sum gross payment.

NottinghamKnight

mattysgsg said:

I'm exceeding by £50k from savings, CF already used up. Lump-sum gross payment.

So have you exceeded your earnings for the year, that breaches the pension rules in itself.

Marcon

NottinghamKnight said:

mattysgsg said:

I'm exceeding by £50k from savings, CF already used up. Lump-sum gross payment.

So have you exceeded your earnings for the year, that breaches the pension rules in itself.

No - just means there is no tax relief available on any of the £50K. OP, as advised above, you need to check with your pension provider that they can handle it. Assuming you are in a relief at source scheme (?SIPP), the provider would only claim basic rate tax, but many SIPP providers make it a condition of their contract that you won't 'overpay' as you intend to do.

Any higher rate tax needs to be claimed by the person making the contribution, so you simply wouldn't claim any such higher rate relief.

Albermarle

mattysgsg said:

If I exceed allowed annual allowance by £50k lump sum payment, but did not claim tax relief, is there additional tax to pay. Assume tax relief would have been 40% if claimed, and 40% would be the rate paid if a tax charge was due.

An obvious question is why would you do that anyway. There will be no tax relief on the way in but it will be taxable on the way out. Unless there are some unusual circumstances it would not be a good idea at all .

mattysgsg

May seem silly, but the reason is I can buy £7,194 in the local gov pension scheme for approximately £80k lump sum, I doubt the job will last much more than a year hence the urgency. I have to pay it gross and claim any tax relief back. I'm assuming if I don't claim it back, I don't have to pay extra tax as I've not gained any relief. The win is the £7,194 plus CPI additional pension for an £80k lump sum contribution. It clearly beats any annuity on the market. That's the background if anyone was thinking I might be a tad nuts, it's a decent opportunity if I don't have long to do it.

hugheskevi

mattysgsg said:

May seem silly, but the reason is I can buy £7,194 in the local gov pension scheme for approximately £80k lump sum, I doubt the job will last much more than a year hence the urgency. I have to pay it gross and claim any tax relief back. I'm assuming if I don't claim it back, I don't have to pay extra tax as I've not gained any relief. The win is the £7,194 plus CPI additional pension for an £80k lump sum contribution. It clearly beats any annuity on the market. That's the background if anyone was thinking I might be a tad nuts, it's a decent opportunity if I don't have long to do it.

If you purchase £7,194 p/a of Added Pension, that will result in a pension input of £115,103 in addition to the pension input from your normal pension accrual.

That will breach the Annual Allowance, with the excess pension input over your standard Annual Allowance of £40,000 being added to your taxable income to determine the tax charge (you say above you have no Carry-Forward). Even ignoring the pension input from standard pension accrual and assuming you have nil taxable income due to the contribution, that is still a breach of £75,103 resulting in a tax charge of £17,541.20.

garmeg

hugheskevi said:

mattysgsg said:

May seem silly, but the reason is I can buy £7,194 in the local gov pension scheme for approximately £80k lump sum, I doubt the job will last much more than a year hence the urgency. I have to pay it gross and claim any tax relief back. I'm assuming if I don't claim it back, I don't have to pay extra tax as I've not gained any relief. The win is the £7,194 plus CPI additional pension for an £80k lump sum contribution. It clearly beats any annuity on the market. That's the background if anyone was thinking I might be a tad nuts, it's a decent opportunity if I don't have long to do it.

If you purchase £7,194 p/a of Added Pension, that will result in a pension input of £115,103 in addition to the pension input from your normal pension accrual.

That will breach the Annual Allowance, with the excess pension input over your standard Annual Allowance of £40,000 being added to your taxable income to determine the tax charge (you say above you have no Carry-Forward). Even ignoring the pension input from standard pension accrual and assuming you have nil taxable income due to the contribution, that is still a breach of £75,103 resulting in a tax charge of £17,541.20.

Is there still a tax charge even if no tax relief was claimed? Seems harsh.

mattysgsg

garmeg said:

hugheskevi said:

mattysgsg said:

May seem silly, but the reason is I can buy £7,194 in the local gov pension scheme for approximately £80k lump sum, I doubt the job will last much more than a year hence the urgency. I have to pay it gross and claim any tax relief back. I'm assuming if I don't claim it back, I don't have to pay extra tax as I've not gained any relief. The win is the £7,194 plus CPI additional pension for an £80k lump sum contribution. It clearly beats any annuity on the market. That's the background if anyone was thinking I might be a tad nuts, it's a decent opportunity if I don't have long to do it.

If you purchase £7,194 p/a of Added Pension, that will result in a pension input of £115,103 in addition to the pension input from your normal pension accrual.

That will breach the Annual Allowance, with the excess pension input over your standard Annual Allowance of £40,000 being added to your taxable income to determine the tax charge (you say above you have no Carry-Forward). Even ignoring the pension input from standard pension accrual and assuming you have nil taxable income due to the contribution, that is still a breach of £75,103 resulting in a tax charge of £17,541.20.

Is there still a tax charge even if no tax relief was claimed? Seems harsh.

Which is the question I'm trying to find an answer too. Is there a tax charged, given no relief claimed. That's the question basically.