Confused: tax band 21% process

FloraandFauna

Apologies for bothering people here - but I have read the gov website and can't find the answer (or don't understand the terminology...).
I'm a Scottish 21% taxpayer, so when I opened a Vanguard SIPP earlier this year it automatically sorted out the 20% rate, but suggests I need to claim the additional 1% myself. This 1% won't get added to the SIPP, but will change my tax code?
The gov website just says "tell us", so I'll do that, but it doesn't say when to tell them. Having just seen another thread mention that you can only get tax relief in the same year you make the contribution - does this apply here? Do I need to tell them before the end of March, or do I wait until the beginning of April, tell HMRC how much I've contributed to the SIPP in 20/21, and then they adjust my tax code for 21/22?

jem16

If you're sure of the amount you will pay this tax year then you can tell HMRC now. If you're not sure and think you may still pay in more than you can wait till April if you want. You will still get the tax relief.

The most important part is to make sure you give HMRC the gross payment and not the net payment that you contributed.

Dazed_and_C0nfused

You cannot get tax relief through your 2021:22 tax code for pension contributions made in 2020:21.

You either notify HMRC as jem16 said and get a revised 2020:21 tax code or you want until the 2020:21 tax year is finished and get a refund, for 2020:21, direct from HMRC.

You have until 5 April 2025 to notify HMRC.

When contacting HMRC it would be wise to notify them of four things,
The gross amount of the relief at source pension contribution you will make in 2020:21
The gross amount of the relief at source pension contribution you expect to make in 2021:22
Your estimate of your taxable pay in 2020:21 (figure you expect to see on your 2020:21 P60)
Your estimate of your taxable pay in 2021:22 (figure you expect to see on your 2021:22 P60)

FloraandFauna

Thank you both! 

A pity every answer leads to more questions...    so... if I were to tell them now my predicted contributions for this year, the numbers I would use would be:

£2,500 into SIPP so far (£500 of which is HMRC tax);
another £2,062.50 from now up to and including? 1st April (£412.50 of which is HMRC tax);
so £4,562.50 in total.

Only that's just the SIPP - do I need to add that amount to the figure I'm paying into the Alpha pension as well?

So £1,330.80 from me so far, £6,617.28 from employer so far (indicative not actual as this is DB), with a predicted further £3,974.04 up to and including? 1st April.

So I would report to them now that I expect to be paying in £16,484.62? (this year's SIPP to date, this year's Alpha to date, predicted SIPP from now until April 1st, predicted Alpha from now until April 1st - includes all tax back and employer contributions?)

Dazed_and_C0nfused

You like to complicate matters

You would never ever mention the Alpha contribution.  

You are already receiving the maximum possible tax relief on that.

What is important is that you understand the difference between your salary (generally irrelevant for tax purposes) and taxable pay.

FloraandFauna

See, 'never ever', is the sort of emphatic advice I like 

My payslips helpfully list taxable pay separately from annual salary.

So just tell them the total predicted amount going into the SIPP for both years, both years' taxable salary, and let them fret about whether or not I also have a civil service DB pension as well.

I'm more confused about why I wouldn't tell them the whole pension picture. Wouldn't they need to know the total contribution amount across all sorts of pensions to decide whether I'm allowed/within my limits to claim the tax rebate on the SIPP part of it?

jem16

FloraandFauna said:

See, 'never ever', is the sort of emphatic advice I like 

My payslips helpfully list taxable pay separately from annual salary.

So just tell them the total predicted amount going into the SIPP for both years, both years' taxable salary, and let them fret about whether or not I also have a civil service DB pension as well.

I'm more confused about why I wouldn't tell them the whole pension picture. Wouldn't they need to know the total contribution amount across all sorts of pensions to decide whether I'm allowed/within my limits to claim the tax rebate on the SIPP part of it?

Whether you're allowed to claim tax relief is down to you. There are also different allowances. £40k is the annual allowance and you're nowhere near that.

Your Civil Service pension is already receiving maximum tax relief so ignore that. Only thing that matters in claiming that extra 1% are gross contributions into the SIPP. So calculate what you expect the total is for 2020/21 and phone HMRC now. They will adjust this year's tax code to give you that refund and if you intend contributing going forward they will also apply it to next year's tax code too unless you don't want them to.

Dazed_and_C0nfused

You are just making life much more complicated than it needs to be which in turn leaves the potential for things to go wrong.

Tax is all about detail and the details that matter here are your taxable income and pension contributions on which you are able to claim tax relief from HMRC.

Your taxable pay is what will be shown on your P60.  You cannot claim tax relief on the Alpha contributions as you already receiving the maximum possible tax relief by them reducing your salary down to the taxable pay figure.

It is upto to you to calculate if you are eligible to make the SIPP contribution, that isn't something HMRC advisors would be responsible for.

FloraandFauna

Yeah, sorry both, I'm not being clear. I wasn't suggesting telling them the total so they could apply tax relief to the total - I understand the DB part has already been dealt with by the Alpha Scheme.

I meant so that they could check that in applying for the extra 1% on the SIPP total, I'm not breaching the annual allowance across all pension contributions. But you both say they leave that to me to determine (how refreshing!). Which makes the whole thing make sense to me now. Thank you!

FloraandFauna

Ooo-er.

Just spoken to a very nice lady at HMRC to amend my tax code. She's lovely, but she didn't know what a SIPP was, and didn't know that Scotland had different income tax bands.  You can imagine - between the two of us terminology-lite ignoramuses - how well that conversation went.

Still, she's done something that's resulted in my tax code increasing slightly, so... that's good?

Dazed_and_C0nfused

SIPP you could just about understand but not knowing Scottish tax rates were different 😳