Pension Tax Relief.

Jocarj

Good evening all,
I'm a new member on here and this is my first post so hello to all...
I'm looking for and would appreciate any help on this as it's a new situation for me which I am trying to understand fully.
I've always paid into pension schemes since I started work many years ago.
I started to become a higher rate tax payer from 2016 fortunately.
However, I only recently discovered that if you make pension contributions as a higher rate tax payer, whilst the initial 20% is taken at source, an "additional 20%" can be claimed back from HMRC subject to what you have paid in higher rate tax and pension contributions.
Firstly, I currently pay into a personal pension via direct debit into one scheme.
Then, a contribution is deducted from my payslip, and my employer matches that, and this is paid into another scheme.
I am currently in the process of reclaiming this overpaid tax so I want to be sure I know what I am doing.
My current understanding so far is this:

- The contributions on my payslip taken from my pay and my the contribution from my employer are both "Gross" and referred to as "EES" (Employees) and "ERS" (Employers) respectively.
- I convert my personal pension contribution, paid by Direct Debit, into "Gross" by dividing by 80 and multiplying by 100.
- I can reclaim back to include 2016/17 if I reclaim in this current tax year (i.e. 4 years historically).

My first question is, should all 3 of these-then "Gross" contributions be added together when calculating my total contribution, or should I only be including the contributions I make (i.e. so not the "ERS" contribution" but just the other 2).
Or in other words, can I not reclaim any "Additional" tax relief on the contribution by my employer ("ERS")?

Many thanks!

Dazed_and_C0nfused

There is no tax relief due to you on employer contributions.

It's not clear yet if you can claim anything for both of the other contributions. 

Are your payslip contributions definitely "relief at source" contributions and not "net pay"?

Your comment whilst the initial 20% is taken at source is oddly worded as relief at source is added.

There is no fixed "additional 20%".  Your gross contribution increases the amount of basic rate tax you can pay, which in turn can reduce the amount of higher rate tax payable and it can impact other things as well (eligibility for Marriage Allowance, amounts of savings nil rate band).

Have you completed a Self Assessment return for 2016:17 or more recent tax years?

Funkyfreddy

Your "contributions made by DD into your Personal Scheme see tax relief through the industry wide Relief At Source (RAS) - you benefit from Basic Rate relief by having your own net contribution increased to a Gross figure. If you have taxable income above the higher rate threshold you may be due a repayment from an overpayment of income tax.

You can't claim relief on contributions you haven't made so can't claim it on any employers contributions - what made you think you could ?

You say that your own employee contributions are Gross which would suggest they are deducted from your pay before the calculation of income tax through a Net Pay Arrangement which would mean you have benefited from relief at the highest rate applicable to your taxable pay already. Don't your pay summaries show a differential between Gross and Taxable pay to date figures ?

Jocarj

Dazed_and_C0nfused said:

There is no tax relief due to you on employer contributions.

It's not clear yet if you can claim anything for both of the other contributions. 

Are your payslip contributions definitely "relief at source" contributions and not "net pay"?

Your comment whilst the initial 20% is taken at source is oddly worded as relief at source is added.

There is no fixed "additional 20%".  Your gross contribution increases the amount of basic rate tax you can pay, which in turn can reduce the amount of higher rate tax payable and it can impact other things as well (eligibility for Marriage Allowance, amounts of savings nil rate band).

Have you completed a Self Assessment return for 2016:17 or more recent tax years?

Thank you for that.
The contributions appear on the right hand side of my payslip under deductions and feature "Per" but other than that, how do I tell? I can ask my employer worse-case.
Yes, not clear the "taken at source". I think I'd focussed too much on deductions!
On the "additional 20%", I had actually seen examples with a final percentage of less than 40% actually.
I've not done a Self Assessment certainly since 2016. Last time was early noughties.

Funkyfreddy said:

Your "contributions made by DD into your Personal Scheme see tax relief through the industry wide Relief At Source (RAS) - you benefit from Basic Rate relief by having your own net contribution increased to a Gross figure. If you have taxable income above the higher rate threshold you may be due a repayment from an overpayment of income tax.

You can't claim relief on contributions you haven't made so can't claim it on any employers contributions - what made you think you could ?

You say that your own employee contributions are Gross which would suggest they are deducted from your pay before the calculation of income tax through a Net Pay Arrangement which would mean you have benefited from relief at the highest rate applicable to your taxable pay already. Don't your pay summaries show a differential between Gross and Taxable pay to date figures ?

It didn't really make sense to me that you could reclaim tax on employer contributions but because I am a novice I thought it prudent to check in case they in some way counted as my contribution.
I learnt my contributions were Gross from HMRC but they are deducted alongside NI and income tax (in the same section).
Yes, my payslip shows those it seems.

Dazed_and_C0nfused

If your company scheme uses "net pay" then you cannot claim anything for those contributions as you have already received the maximum possible tax relief, for example salary £60,000 less 10% pension contribution = £54,000 taxable pay (the amount which is shown on your P60).

Assuming your personal contributions are to a relief at source scheme (you will be able to see pension company adding basic rate relief on your pension statements) then you can claim higher rate relief on those.

If you haven't filed Self Assessment returns the process is fairly straightforward.  You will need to provide HMRC with details of the gross amounts contributed each tax year (make it clear the figures include the basic rate relief added by the pension company).  Do not tell them anything about net pay or employer contributions.

Don't forget pension tax relief is only ever allowed against the tax year you made the contribution in so HMRC will recalculate your tax for each year involved.  Any refund due will come to you, it does not get added to your pension fund.

Going forward you should let HMRC know what you expect to pay into the probate pension in the current tax year and also in 2021:22 so they can update your tax codes.  

Jocarj

I have my pension statements so I will see what features on those. I suspect it may be a "relief at source" scheme.
Not filled in a SA for 20 years but I remember it self assessment wasn't too bad even then.
OK.
Thanks for all your help folks!

Funkyfreddy

With a Net Pay Arrangement your pay summaries will (should) show Total Gross and Taxable pay to date figures - compare the difference between the two against your own pension contributions year to date figure.

AlanP_2

Don't forget you can only claim HR relief to the extent that you paid HR tax.

If for example, you earnt £60k as in the above example, and contributed £6k to the workplace scheme under Net Pay you would get autoatic 40% reliefr on that £6k and would have £4k of income left taxed at 40%, so up to that level of contribuytion via DD to your personal scheme would qusalify for HR relief. If, on the other hand, you contributed £10K through work then none of your personal DD contributions would attract 40% relief.

Those calculations will need to be done on a per year basis to work out what you can claim for.  

Jocarj

I had a look at my pension statement last night and it features the basic rate tax relief being added so I now know I have a "relief at source" scheme.

Funkyfreddy said:

With a Net Pay Arrangement your pay summaries will (should) show big Gross and Taxable pay to date figures - compare the difference between the two against your own pension contributions year to date figure.

My payslip shows "Gross pay for tax" and "Total pay" and they are almost identical so that must confirm my first sentence above.
Thanks again all...