Over pay pension

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mattysgsg said:

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.

I think @hugheskevi missed that point?

hugheskevi

Your pension input and Annual Allowance breach is the same regardless of whether you choose to reclaim tax or not.

When you complete Self-Assessment to declare the Annual Allowance charge you will fill in all relevant fields - including those declaring the pension contribution - and at that point you will receive tax relief for the contribution (if you have not claimed it previously, eg through a Coding Notice adjustment) and also incur the Annual Allowance charge.

If you decided not to declare the pension contribution and voluntarily pay more income tax than necessary, you would pay more income tax, and the Annual Allowance charge would be higher as the breach is added to taxable income to calculate the charge.