Higher Rate Relief on Pension Contributions via Self-Assessment

nb8019

Hi - I have been completing self-assessment for the last 5 years or so but only recently realized I need to claim tax relief on my pension contributions as a higher tax rate payer. I understand I can do this on a back-dated basis for the last four tax years, and am confirming with HMRC to adjust. I had a few questions:
1. I don't think my employer/s would have claimed the extra relief on my behalf during this time, just the basic 20%. Is that likely the case or does it differ by organization?
2. If they did not claim that extra relief above the basic rate, how do I reflect this in the self-assessment form? In the box HMRC directed me to it says "Payments to your employer’s scheme which were not deducted from your pay before tax" - do I just put the calculation of the missed relief in there (i.e. the 25% of my pension contributions in employer scheme)?

Thanks!

r6mile

My understanding is that if your contributions were paid by your employer out of gross salary, relief was therefore already applied. It's only if you make post-tax contributions into your pension (ie a SIPP) that you would be able to claim extra relief.

Dazed_and_C0nfused

Your employer wouldn't have claimed anything, it's nothing to do with them.

Do you actually know which method has been used to get the money into the pension?

A lot of contributions get the maximum tax benefit immediately, there is nothing else to claim (or include on a Self Assessment return).

The normal options are,

Net pay

Relief at source

Salary sacrifice

nb8019

Thanks for the quick replies - for the specific years I am querying I think had a 'salary sacrifice'. Does this mean the relief would have been done at source? 

nb8019

In my current tax-year and the one prior though it is "relief at source" - can you help me understand the difference in terms of the impact on tax relief and how I should claim through my self-assessment? Really appreciate the help.

TheBanker

The three ways are:

Net pay - your employer deducts the pension contributions from your net pay, before deducting tax from the remainder. So no tax is paid on these contributions, and there is nothing to re-claim.

Relief at source - this normally applies where you make the contribution to a pension rather than it being dealt with through your payroll. Here, the pension provider claims basic rate tax relief from HMRC on your behalf and adds it to the pension (so if you paid in £100, you will see another credit to the pension for £25, normally about six weeks later). If you're a higher rate tax payer, you can re-claim the difference between basic and higher rate tax through your Self Assessment return.

Salary sacrifice - Here, your employer reduces your salary and makes extra employer pension contributions . You haven't actually contributed anything to the pension so there is no tax to reclaim (and you haven't paid tax on the contributions due to your lower salary). This is normally the best way to contribute if it's available to you, as it also leads to a saving in National Insurance - but there is nothing to declare on your tax return. 

Dazed_and_C0nfused

nb8019 said:

Thanks for the quick replies - for the specific years I am querying I think had a 'salary sacrifice'. Does this mean the relief would have been done at source? 

Salary sacrifice means you aren't even contributing to a pension!

You are agreeing to a lower salary in return for your employer making additional pension contributions.  As these are employer contributions you don't get any tax relief.

The benefit is you don't have the income to be taxed (or pay NI on) in the first place.

Dazed_and_C0nfused

nb8019 said:

In my current tax-year and the one prior though it is "relief at source" - can you help me understand the difference in terms of the impact on tax relief and how I should claim through my self-assessment? Really appreciate the help.

Relief at source contributions do get included on a tax return.

There is nothing to "claim" as such, you simply enter the RAS contributions on the tax return and they are taken into account in your Self Assessment calculation.

This is done by the basic rate band being increased, meaning more income can be taxed at 20% and less at 40%.

If you have filed a return for 2021:22 and failed to include your RAS pension contributions then you will need to amend that return.

For 2022:23 just complete the return correctly.

You don't include salary sacrifice contributions on your tax return as you didn't pay those

Albermarle

r6mile said:

My understanding is that if your contributions were paid by your employer out of gross salary, relief was therefore already applied. It's only if you make post-tax contributions into your pension (ie a SIPP) that you would be able to claim extra relief.

From a tax point of view it does not matter what kind of DC pension you contribute to . A SIPP is just a type of DC pension, and the exact definition of a SIPP is not always that clear anyway, as it is also used as a marketing term.

xylophone

This thread might be of interest.

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