Overpaid annual pension - advice please

My_perfect_cousin

Hi
Having submitted my tax return for 2019/20 and settled up with HMRC, I received my 2019/20 annual pension info from my LGPS employer today (so, after 31st Jan).
Employer says that I owe tax on pension as I exceeded the £40K in 2019/20. I wasn't aware of this. 
I have used my 'old' 3 year pension c/fs for in house AVCs so don't have a balance to call upon. 
The figure that they have for my total pension contribution in 2019/20 seems very high. It is far higher than previous years even though I reduced my AVC contributions in 2019/20. I will call the pension team tomorrow to talk through their calculations to understand what is what.
I reduced my AVCs to a minimal amount in 2020/21. My salary is unchanged. I don't expect this surprise this year!
I will retire at some point within the 2021/22 financial year.
The paperwork includes reference to making a call on the pension pot as the figure exceeds £2k. I will ask them about this.
Assuming that the pension people haven't have an error and that I did exceed my pension contribution cap in 2019/20, what are the next steps? I'd value any advice please.
many thanks

My_perfect_cousin

Quick update. I spoke with the employer pension team who apologised for not alerting me earlier. They now need me to work out how much tax I'll need to pay on the overpayments to enable them to let me have figures should I want to pay it from within my pension.  They said that the bill will be either 20%or 40% of the excess depending on my tax rate for 2019-20. 
What I'm unclear about is whether I need to simply use my 2019-20 tax rate from my submitted tax return (pre the excess pension issue) or factor in the excess pension that I'm now aware of and re-calculate my tax position after that calculation. 
All wisdom much appreciated thanks

Albermarle

The paperwork includes reference to making a call on the pension pot as the figure exceeds £2k. I will ask them about this.

Can you clarify what this means ?

Dazed_and_C0nfused

I suspect it's what is commonly known as "scheme pays".

https://www.aegon.co.uk/support/faq/pension-technical/scheme-pays-faq.html

My_perfect_cousin

Dazed_and_C0nfused said:

I suspect it's what is commonly known as "scheme pays".

https://www.aegon.co.uk/support/faq/pension-technical/scheme-pays-faq.html

yes - it's scheme pays. 

My_perfect_cousin

Thanks Dazed and Confused.
To calculate my marginal tax rate for 2019-20 for the purposes of calculating the tax owing on my pension excess should I:
1) Use the marginal tax rate from my submitted tax return for 2019-20 (ie prior to being made aware of the overpayment of pension) or
2) Add the overpayment of pension figure to my income for 2019-20 to generate what will become a higher marginal tax rate? or
3) something else.
any wisdom on this would be great thanks

My_perfect_cousin

From checking through my tax return that there is an Additional Form (Ai 4) for when pension exceeds the £40k.  I will complete and submit to HMRC. I need to complete boxes 10, 11 and 12 of it. Of these boxes, I have the info for 10 and 12.  Box 11 requires me to state the tax that I owe.
I spent over an hour trying to speak with HMRC today to ask how I calculate the tax owing  for 11. I wasn't able to get through.  Any insight into how tax owing is calculated would be grand if anyone is able to help - many thanks.

superboredatwork

my understanding is you can carry over unused allowance - so before do check you have any you can use. you then have to pay 40% of whatever the over payment is unless you're on megamoney (i think £150k+ pa but check).  I think your pension company should be able to help you but if i was you id try again for HMRC.

superboredatwork

superboredatwork said:

my understanding is you can carry over unused allowance - so before do check you have any you can use. you then have to pay 40% of whatever the over payment is unless you're on megamoney (i think £150k+ pa but check).  I think your pension company should be able to help you but if i was you id try again for HMRC.

sorry just to say, i think its 40% because if you've paid over £40k in pension, youre likely to be in that tax bracket.

Dazed_and_C0nfused

Extract from link below

Annual Allowance tax charge

At the end of every tax year, the member must calculate the aggregate pension input amount for all of their pension arrangements and compare this total to the Annual Allowance for that tax year – this will also include any available carry forward where eligible.

The annual allowance charge is a percentage, levied on the pension input amount that exceeds the available Annual Allowance. The liability for this charge rests with the member. The member notifies via the self-assessment tax process even if scheme pays applies (explained below). If scheme pays does not apply then the charge is collected via self-assessment. Although the charge is to income tax, the amount is not income for tax purposes and therefore the member cannot set any allowances, losses or relief against it.

It should also be noted that the full amount of relievable pension contributions should be included in the tax return not just the amount of contributions up to the annual allowance.

As explained before, tax relief on contributions works the same way as it always has done, independent of the fact there is an annual allowance. Whilst related, the two topics are essentially separate for taxation purposes.

Amount of charge

The amount of the charge depends on the member's taxable income, or reduced net income in HMRC terms and where they live in the UK.

Scottish taxpayers will pay the Scottish rate of income tax (SRIT) on non-savings and non-dividend (NSND) income. NSND income includes employment income, profits from self-employment (including sole trades and partnerships), rental profits, and pension income (including the state pension). Similarly, from 6 April 2019 Welsh Taxpayers pay the Welsh Rate of Income Tax (CRIT (C for Cymru)) on NSND income.  

Other tax and deductions such as Corporation Tax, dividends, savings income and National Insurance Contributions etc. will remain based on UK rules. This could mean the amount of income tax relief which can be claimed on pension contributions by Scottish and UK tax payers may not be the same. For more info on SRIT and how this works in practice, please visit our facts page. For more info on CRIT and how this works in practice, please visit our facts page.

In simple terms, the amount of the annual allowance excess is added to the top part of the person’s taxable income. This is purely to find the tax rate to use for the charge. It is not treated as income for calculations of other tax implications ie it will not lead to a high income child benefit tax charge or loss of the personal allowance etc.

https://www.pruadviser.co.uk/knowledge-literature/oracle-plus/annual-allowance/