Adding pension contributions to a self-assessment

hallmark

I have a friend who works for BT and contributes to their DC pension scheme (BT contribute and they personally contribute).  They're a higher-rate taxpayer.

Should they add their own pension contributions to their self-assessment?  I was under the impression they should, in order to get the extra 20% tax relief on the amount of contributions that are in the higher tax band (in other words, if they earnt £60k and paid 40% tax on £10k of that, then they would get an additional 20% tax relief on up to £10k of pension contributions).

Is that correct?  What's confusing is the Self-Assessment form says: "Did you make contributions towards a personal pension or retirement annuity? This does not include payments you make to your employers pension scheme, which are deducted from your pay."

I'm not sure if "This does not include payments you make to your employers pension scheme, which are deducted from your pay." is referring to Salary Sacrifice?   Or if it means they shouldn't include any pension payments they make the BT scheme? (the latter wouldn't make much sense to me as I don't see how they get to claim back the extra 20% tax in that case).

Dazed_and_C0nfused

No one can claim pension tax relief for salary sacrifice contributions as they are employer contributions (paid in return for a reduced salary).

You don't include net pay contributions on a Self Assessment return either.

But you do include relief at source contributions.

And it's not a fixed extra 20%, the gross contribution increases your basic rate band so more tax is paid at basic rate and less at higher rate.  Which could be 20% extra but how much higher rate tax has been paid is a factor.

hallmark

I think the question becomes is their BT pension Net Pay or Relief At Source. I'm not sure (and not certain how they find out)

Dazed_and_C0nfused

A lot of DC schemes are relief at source but I would expect the main BT scheme is more likely to be net pay.

The two ways to be certain are checking a payslip or the pension account.

If it's net pay then monthly salary of say £3,000 with 10% contribution will show as taxable pay of £2,700 on the payslip.  Tax benefit is from having less income to pay tax on.

Relief at source is where the pension company add basic rate tax relief to the contribution, courtesy of HMRC.  For example a (net) contribution of £100 will have £25 added, making a gross contribution of £125 (20% of £125 = £25).

Albermarle

So if they check their pension online, they should be able to see whether the provider is adding tax relief to the employee contributions or not.

Qyburn

Or check their payslip, for example my employee contributions are deducted after tax.