Non-Taxpayer paying too much Into a Pension

Kevin_French

I am 59 years old. I don't intend to draw from my old pension pot (Legal & General) until Sept 2023 when I turn 60
April 2021 - March 2022 I paid £13829 from my salary into my (Newer) company (BT) pension with Standard Life.
I took a redundancy package from my employer 31 March 2022.  £30k tax free, £12k into my pension. 
  I have paid an additional £13380 into my pension from my savings since April 2022. I have been given tax relief of £3345 making a total of £16725 for the year.
Problem is, I thought that I could contribute up to £40k inc tax relief into my pension. I have now found out that as a non-taxpayer my limit is £3.6k inc tax relief.
I have tried speaking to the HMRC. They don't know what to do. Somebody will call me back in a few hours or days. 
 I did read somewhere that I could be liable to paying 46% tax. 

Can anybody help please. 
 

Dazed_and_C0nfused

There is no such limit for non taxpayers, plenty of non taxpayers will contribute £10k.

I presume you mean non earner limit.

Do you expect to have any pensionable earnings at all in the current tax year?  Was none of your BT income paid in the current tax year?

Have you approached your pension provider about this yet, they are a much better bet than HMRC at this stage.

Albermarle

I think the usual route is to ask your pension provider to refund the money to you, and presumably the tax relief back to HMRC.

dunstonh

There is no such limit for non taxpayers, plenty of non taxpayers will contribute £10k.

Indeed, it is possible for some non-taxpayers to have £160,000 paid into their pension.

xylophone

as a non-taxpayer my limit is £3.6k inc tax relief.

Are you a non taxpayer or  a non - earner?

Take  as an example a person aged under 75 whose only income is his salary of £12,570  from a part time job. He pays no tax.

Let's say that his spouse is a high earner and pays all the bills so that in effect that salary is "pocket money".

They decide that he will pay as much as possible into his personal pension.

He therefore contributes £10,056 to his personal pension and the pension provider claims £2,514 from HMRC and adds it to his pot.

biscan25

Albermarle said:

I think the usual route is to ask your pension provider to refund the money to you, and presumably the tax relief back to HMRC.

This. Tax has to be paid back to HMRC in any case.
I think they call this the excess contribution condition. See PTM045000

michaels

Is it basically a case of exceeding annual allowance so could you leave the over-payments in the pension and then repay the tax relief on your tax return?  Downside of this is if you are taxed on the way out but have received no relief on the way in.

xylophone

It's not so much the amount paid in as the fact that excess tax relief may have been received.

https://www.royallondon.com/articles-guides/pensions-and-retirement/understanding-pension-tax-relief/

Limits on tax relief and how much you can contribute

There’s no limit on how much you can save into your pensions each tax year. But there are limits on how much tax relief will apply.

This is 100% of your earnings on contributions you make. So if you earn £20,000, then your limit would be £20,000.  If you don’t have any earnings the most you can pay into a pension is £2,880. Then tax relief is added to make a total of £3,600.

https://www.imperial.ac.uk/human-resources/pay-and-pensions/pensions/tax-relief-on-pension-contributions/

There is no restriction on the amount that can go into individuals’ pensions, but there are annual and lifetime limits on how much tax relief individuals receive on their pension contributions.

xylophone

I think the usual route is to ask your pension provider to refund the money to you, and presumably the tax relief back to HMRC.

https://www.gov.uk/guidance/tell-hmrc-youve-claimed-too-much-relief-at-source-for-pension-scheme-members

QrizB

Kevin_French said:

Can anybody help please.

This might be an extreme option, but you could get a job!

zagfles

michaels said:

Is it basically a case of exceeding annual allowance so could you leave the over-payments in the pension and then repay the tax relief on your tax return?  Downside of this is if you are taxed on the way out but have received no relief on the way in.

The annual allowance hasn't been exceeded, OP looks to be well inside it. It's the tax relief limit that has been exceeded. There's nowhere on a tax return to fix that.

OP - you need to inform the pension provider who claimed the relief. They can give a refund for any excess contributions, see

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm045000#Refundecls

or leave it in the pension with the excess tax relief returned to HMRC.

But you've probably violated their T&Cs as most pension providers don't want the hassle of dealing with non relievable contributions. But they still have to sort it out, as xylophone's link above.

However, you can't do that till the end of the tax year, as you can't know what (if any) your relevant earnings are till then. But you can stop paying in if you know you're not to going to be earning enough. See https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100