Vanguard pension payment gross??

donaldtramp

Hi,
I'm looking to make a payment this month to my Vanguard pension(in case the chancellor changes things!). I'm higher rate tax in Scotland. I'm aware of the 40K limits and that I'll need to claim any higher tax relief in tax return.

My question is; if I want to make a paymnent of say 10K do I transfer 10K cash in or 10K minus the 20% tax and then they top it up? 
How does it work?
Cheers

dunstonh

My question is; if I want to make a paymnent of say 10K do I transfer 10K cash in or 10K minus the 20% tax and then they top it up? 

Tax relief is a reduction. Not a top up.    So, if you make a £10,000 contribution you pay it net of basic rate tax and send them £8000.   If you want to pay £10,000 net of basic rate tax then you make a pension contribution of £12,500

 A £40k contribution would be a payment of £32,000

The difference between basic rate and higher rate relief is handled via self assessment. Either by a refund by HMRC or a change in your tax code.

Dazed_and_C0nfused

If you want to make a payment of £10k then you pay £10k 

If you want £10k in your pension fund and it's a relief at source scheme then you pay over £8k and the pension company adds £2k basic rate tax relief.

Note HMRC only ever allow pension tax relief for the tax year the contribution is made in.  But when you file your 2020:21 Self Assessment return they may well assume you are going to make a similar contribution in the 2021:22 tax year and adjust your 2021:22 tax code to include relief on pension contributions.  This is not relief due for 2020:21 it is provisional relief for 2021:22 so if you don't plan on making similar large contributions in 2021:22 you should arrange for the pension tax relief in your tax code to be revised.

donaldtramp

If you want to make a payment of £10k then you pay £10k  

Yup I understand But I don't want to go over the annual 40K limit. (I also have a works pension through my employer, separate to this personal pension) So If I put in 10K and they top it up....

donaldtramp

Tax relief is a reduction. Not a top up.    So, if you make a £10,000 contribution you pay it net of basic rate tax and send them £8000.   If you want to pay £10,000 net of basic rate tax then you make a pension contribution of £12,500

So If I send them £8000, My pension account with Vanguard will show a £10,000 increase?

Albermarle

So If I send them £8000, My pension account with Vanguard will show a £10,000 increase?

Yes, but not immediately as the tax relief can take a few weeks to appear.

threlkeld53

donaldtramp said:

So If I send them £8000, My pension account with Vanguard will show a £10,000 increase?

HMRC's month runs from the 6th to the following 5th.
If you make a payment into your pension for example on 3rd July, the HMRC top-up will appear in your account 21st August.
If you miss the 5th of the month cut-off deadline and make payment on the 6th or 7th of July, then your account will be credited with the 25% relief on 21st September.

xylophone

Yup I understand  But I don't want to go over the annual 40K limit. (I also have a works pension through my employer, separate to this personal pension) So If I put in 10K and they top it up....

What kind of pension scheme is this (DB/DC) and how is tax relief given?

Net pay?

Relief at source?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

donaldtramp

xylophone said:

Yup I understand  But I don't want to go over the annual 40K limit. (I also have a works pension through my employer, separate to this personal pension) So If I put in 10K and they top it up....

What kind of pension scheme is this (DB/DC) and how is tax relief given?

Net pay?

Relief at source?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

My works pension is relief at source (salary sacrifice). I've looked up and worked out how much is going to in to it for this tax year

Dazed_and_C0nfused

donaldtramp said:

xylophone said:

Yup I understand  But I don't want to go over the annual 40K limit. (I also have a works pension through my employer, separate to this personal pension) So If I put in 10K and they top it up....

What kind of pension scheme is this (DB/DC) and how is tax relief given?

Net pay?

Relief at source?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/interaction-of-tax-relief-and-annual-allowance/

My works pension is relief at source (salary sacrifice). I've looked up and worked out how much is going to in to it for this tax year

Relief at source and salary sacrifice couldn't be more different if they tried 

One you don't pay and you get no pension tax relief.

The other you pay and you do get pension tax relief.

donaldtramp

I thought with pensions that are paid salary sacrifice you are getting relief at source by courtesy tgat the money is just paid straight into your pension account before any tax is paid?