Can I pay more into my workplace pension?

gelato_cat

Thank you @Dazed_and_C0nfused, @xylophone, @AlanP_2, @Pat38493, @Albermarle, @MallyGirl and @Brie!

I feel much more enlightened now.

Edited to strike out the below so as not to confuse anyone else reading this thread looking for answers.

I have a favour to ask - I have been doing some calculations to see how much I can put in this year and for last year's carry forward - would someone be able to check my maths for me please?

This tax year and last tax year I earned more than £40k gross, so my annual allowance was £40k for each year, and was part used by making contributions from my gross pay and Nest claiming 20% tax relief for me.  I now realise I need to claim the higher rate tax relief from HMRC.

Here are my numbers.  The bit at the top in green shows all the contributions that have gone into Nest.

The bit underneath that (lines 25-35) is my calculations regarding how much I think I need to put in for this year and last year, so that when the relevant tax relief is added it will add up to £40k per year.

So for last year I think I need to put in from my savings and for this year I need to put in, because (I think) for every £60 I put in, the Govt puts in £40 as tax relief.

Do my calculation methods look right to you?

Dazed_and_C0nfused

The bit underneath that (lines 25-35) is my calculations regarding how much I think I need to put in for this year and last year, so that when the relevant tax relief is added it will add up to £40k per year.

So for last year I think I need to put in £20827.92 from my savings and for this year I need to put in £18427.53, because (I think) for every £60 I put in, the Govt puts in £40 as tax relief.

It may be just the way you've worded it but you cannot make contributions for an earlier tax year.

Contributions are for the tax year you make them in so it's impossible now to contribute for 2021:22.

You may be able to carry forward unused annual allowance to contribute more in this tax year but you have missed the boat as far as 2021:22 is concerned.

And this is wrong.

(I think) for every £60 I put in, the Govt puts in £40 as tax relief.

For every £60 you put in the government adds £15 in basic rate tax relief.  That's it, nothing else is added to your pension.

You may be able to claim some higher rate tax relief, which may or may not be an extra £15 (it all depends on your personal tax position), but £60 from you is a £75 gross contribution.  It could never be £100.

gelato_cat

Dazed_and_C0nfused said:

The bit underneath that (lines 25-35) is my calculations regarding how much I think I need to put in for this year and last year, so that when the relevant tax relief is added it will add up to £40k per year.

So for last year I think I need to put in £20827.92 from my savings and for this year I need to put in £18427.53, because (I think) for every £60 I put in, the Govt puts in £40 as tax relief.

It may be just the way you've worded it but you cannot make contributions for an earlier tax year.

Contributions are for the tax year you make them in so it's impossible now to contribute for 2021:22.

You may be able to carry forward unused annual allowance to contribute more in this tax year but you have missed the boat as far as 2021:22 is concerned.

And this is wrong.

(I think) for every £60 I put in, the Govt puts in £40 as tax relief.

For every £60 you put in the government adds £15 in basic rate tax relief.  That's it, nothing else is added to your pension.

You may be able to claim some higher rate tax relief, which may or may not be an extra £15 (it all depends on your personal tax position), but £60 from you is a £75 gross contribution.  It could never be £100.

@Dazed_and_C0nfusedyes, I worded it wrongly but also got it a bit wrong in my head.  I understand now that it's carried forward to the current tax year.  Thanks!

As for the tax relief part, I think I've figured out why I got confused.  The basic rate tax relief goes into the pension as a contribution, but any higher rate tax relief doesn't - I thought that it did.  So I think I know how to calculate my numbers now so I don't go over the allowance by mistake.

I've seen the below diagram on MSE (on this page) which says a higher rate taxpayer pays £60 and gets tax relief of £40, hence my confusion in my previous post.

Dazed_and_C0nfused

Suzey said:

Dazed_and_C0nfused said:

The bit underneath that (lines 25-35) is my calculations regarding how much I think I need to put in for this year and last year, so that when the relevant tax relief is added it will add up to £40k per year.

So for last year I think I need to put in £20827.92 from my savings and for this year I need to put in £18427.53, because (I think) for every £60 I put in, the Govt puts in £40 as tax relief.

It may be just the way you've worded it but you cannot make contributions for an earlier tax year.

Contributions are for the tax year you make them in so it's impossible now to contribute for 2021:22.

You may be able to carry forward unused annual allowance to contribute more in this tax year but you have missed the boat as far as 2021:22 is concerned.

And this is wrong.

(I think) for every £60 I put in, the Govt puts in £40 as tax relief.

For every £60 you put in the government adds £15 in basic rate tax relief.  That's it, nothing else is added to your pension.

You may be able to claim some higher rate tax relief, which may or may not be an extra £15 (it all depends on your personal tax position), but £60 from you is a £75 gross contribution.  It could never be £100.

@Dazed_and_C0nfusedyes, I worded it wrongly but also got it a bit wrong in my head.  I understand now that it's carried forward to the current tax year.  Thanks!

As for the tax relief part, I think I've figured out why I got confused.  The basic rate tax relief goes into the pension as a contribution, but any higher rate tax relief doesn't - I thought that it did.  So I think I know how to calculate my numbers now so I don't go over the allowance by mistake.

I've seen the below diagram on MSE (on this page) which says a higher rate taxpayer pays £60 and gets tax relief of £40, hence my confusion in my previous post.

It's a bit simplistic but closer to the mark.

Someone paying higher rate tax on £1 of their income is a higher rate payer.  But they can only get higher rate tax relief on £1. 

Although not paying that higher rate tax on £1 can open up other opportunities such as eligibility for Marriage Allowance and a larger savings nil rate band (aka Personal Savings Allowance) for pension relief purposes contributing £80 net would still attract £20 in RAS tax relief but in most cases there would only be a 20p personal tax saving (£1 taxed at 20% rather than 40%).

There is no fixed extra 20%.

xylophone

As for the tax relief part, I think I've figured out why I got confused.  The basic rate tax relief goes into the pension as a contribution, but any higher rate tax relief doesn't - I thought that it did.  So I think I know how to calculate my numbers now so I don't go over the allowance by mistake.

Did you see

https://forums.moneysavingexpert.com/discussion/comment/79942033/#Comment_79942033

Also see

http://www.hmrc.gov.uk/tools/annualallowancelimit/

and link to calculator.

And remember that Annual Allowance increases to £60,000 from April 6.

gelato_cat

Dazed_and_C0nfused said:

Suzey said:

Dazed_and_C0nfused said:

The bit underneath that (lines 25-35) is my calculations regarding how much I think I need to put in for this year and last year, so that when the relevant tax relief is added it will add up to £40k per year.

So for last year I think I need to put in £20827.92 from my savings and for this year I need to put in £18427.53, because (I think) for every £60 I put in, the Govt puts in £40 as tax relief.

It may be just the way you've worded it but you cannot make contributions for an earlier tax year.

Contributions are for the tax year you make them in so it's impossible now to contribute for 2021:22.

You may be able to carry forward unused annual allowance to contribute more in this tax year but you have missed the boat as far as 2021:22 is concerned.

And this is wrong.

(I think) for every £60 I put in, the Govt puts in £40 as tax relief.

For every £60 you put in the government adds £15 in basic rate tax relief.  That's it, nothing else is added to your pension.

You may be able to claim some higher rate tax relief, which may or may not be an extra £15 (it all depends on your personal tax position), but £60 from you is a £75 gross contribution.  It could never be £100.

@Dazed_and_C0nfusedyes, I worded it wrongly but also got it a bit wrong in my head.  I understand now that it's carried forward to the current tax year.  Thanks!

As for the tax relief part, I think I've figured out why I got confused.  The basic rate tax relief goes into the pension as a contribution, but any higher rate tax relief doesn't - I thought that it did.  So I think I know how to calculate my numbers now so I don't go over the allowance by mistake.

I've seen the below diagram on MSE (on this page) which says a higher rate taxpayer pays £60 and gets tax relief of £40, hence my confusion in my previous post.

It's a bit simplistic but closer to the mark.

Someone paying higher rate tax on £1 of their income is a higher rate payer.  But they can only get higher rate tax relief on £1. 

Although not paying that higher rate tax on £1 can open up other opportunities such as eligibility for Marriage Allowance and a larger savings nil rate band (aka Personal Savings Allowance) for pension relief purposes contributing £80 net would still attract £20 in RAS tax relief but in most cases there would only be a 20p personal tax saving (£1 taxed at 20% rather than 40%).

There is no fixed extra 20%.

Thanks @dazed_and_c0nfused - I get it now!

gelato_cat

xylophone said:

As for the tax relief part, I think I've figured out why I got confused.  The basic rate tax relief goes into the pension as a contribution, but any higher rate tax relief doesn't - I thought that it did.  So I think I know how to calculate my numbers now so I don't go over the allowance by mistake.

Did you see

https://forums.moneysavingexpert.com/discussion/comment/79942033/#Comment_79942033

Also see

http://www.hmrc.gov.uk/tools/annualallowancelimit/

and link to calculator.

And remember that Annual Allowance increases to £60,000 from April 6.

Thanks @xylophone, yes, it all makes sense now!  Sadly I'm not sure I'm going to make more than £60k next tax year but you never know

gelato_cat

Thanks everyone for your help, this has been an education and it took me a few days of reading and re-reading and looking at other sites / the links you gave me to get my head around all of this.  I am numerate and literate but this has been a real learning curve.

I decided to open a Vanguard pension so I don't have 1.8% taken in fees instantly.  I've done that now, and paid in the amount that takes me to this year's AA along with the carry forward from last year.  I'll decide what to do with that and the Nest account in the next few weeks.  I'm wondering whether to transfer the Vanguard to Nest because the fees are slightly lower.

For anyone coming across this thread wondering about opening a Vanguard pension as a brand new customer, it was quick and easy, took about five minutes.  As part of the application process I was able to pay my money in using my debit card, and I could see my contribution and the tax relief in my account straightaway which was nice.