Tax relief on gross Pension Contribution help please

Dazed_and_C0nfused

But you didn't make a contribution under RAS so those rules are irrelevant.

You made a gross contribution with no tax relief so it's treated like having extra Personal Allowance and your tax recalculated accordingly.

Do you think there is an error in the calculation?

Wsb5tails

OK so you're saying the £6023 number from them is correct.  That's fine if so but
I thought it would work the same way as my retired non earning wife making a £2880 contribution and getting £720 tax relief added.

Dazed_and_C0nfused

Wsb5tails said:

OK so you're saying the £6023 number from them is correct.  That's fine if so but
I thought it would work the same way as my retired non earning wife making a £2880 contribution and getting £720 tax relief added.

But she has paid under RAS and you haven't 

I have no idea if £6,023 is correct or not without knowing your full income and allowances details.  Things like Marriage Allowance tax credit etc.

Qyburn

Did you do an actual tax return? There's a box to enter pension contributions where Basic Rate tax relief will not be claimed by the scheme.

Wsb5tails

Dazed_and_C0nfused said:

Wsb5tails said:

OK so you're saying the £6023 number from them is correct.  That's fine if so but
I thought it would work the same way as my retired non earning wife making a £2880 contribution and getting £720 tax relief added.

But she has paid under RAS and you haven't 

I have no idea if £6,023 is correct or not without knowing your full income and allowances details.  Things like Marriage Allowance tax credit etc.

There are none of those, no odd allowances, expenses etc.  Just a straight forward
Total Income £55388
Tax paid on above £9587.20
Tax Allowance £12570 Code 1257L

If you say they're correct and I can't get tax relief at the same rate as paying the £25k amount drip fed from salary, I humbly accept defeat.

Thank you

Wsb5tails

Qyburn said:

Did you do an actual tax return? There's a box to enter pension contributions where Basic Rate tax relief will not be claimed by the scheme.

No, never had to and was advised I just needed to write or call.  Its taken 6 months to get this far and I'm just pleased they've accepted that the original figure of Tax relief due was Not £1023 even though the new figure is still £1250 less than I thought.

Linton

Wsb5tails said:

Dazed_and_C0nfused said:

Wsb5tails said:

OK so you're saying the £6023 number from them is correct.  That's fine if so but
I thought it would work the same way as my retired non earning wife making a £2880 contribution and getting £720 tax relief added.

But she has paid under RAS and you haven't 

I have no idea if £6,023 is correct or not without knowing your full income and allowances details.  Things like Marriage Allowance tax credit etc.

There are none of those, no odd allowances, expenses etc.  Just a straight forward
Total Income £55388
Tax paid on above £9587.20
Tax Allowance £12570 Code 1257L

If you say they're correct and I can't get tax relief at the same rate as paying the £25k amount drip fed from salary, I humbly accept defeat.

Thank you

Assuming no other complications....
Without the £25K gross pension contribution:
£12570 at 0%
£37700 at 20%=£7540
£5118 at 40%=£2047.2
Total tax =£9587.2 

With a £25K gross pension contribution
£37570 at 0%
£17818 at 20%=£3563.6 
So tax refund: £9587.2-£3563.6=£6023.6

Linton

Additional note - the overall effect would have been the same under RAS.

The calculations can get very cobnfusing if you start off with a net payment, to avoid complications always work in gross terms.  £25K gross=£20K net no matter what tax band you are in.

 I havent worked out how you got your number but from previous posts questioning higher rate tax relief If you get the calculation wrong it is usually because you have awarded yourself tax relief on the higher rate tax that is returned to you.

jem16

Wsb5tails said:

I wonder if someone would be kind enough to confirm the latest numbers provided by HMRC.  They're not what I thought but happy to be corrected.

Income £55388
Tax paid on above £9587.20
Tax Allowance £12570

£25000 payment made to Pension from Savings (therefore tax paid on receiving it as income) but Zero Tax Relief credited by the Pension Company or any other method.

They say I am due £6023.60 Tax relief i.e £5000 for the £25000 Pension Contribution at 20% basic rate plus £1023 for the element taxed at 40%.

However IF I had made this contribution from earnings where tax relief had been given at source or added by the Pension Company I understood the numbers would have been

£25000 gross contribution from me would attract relief at Basic Rate tax of £6250 plus a further £1023 as understood above for the 40% tax rate.

Am I wrong to have expected the £7273 relief (£6250 plus £1023) or do I loose out having made the Pension Contribution in this way. 

Could you confirm its me or them please?

Many thanks

In the end what matters is the gross payment made to your pension as that’s what the tax relief is based on. £25k has gone into your pension so basic rate tax relief as stated by HMRC is £5k and then you have the further 20% for the amount you’re into higher rate tax territory. 

With the way you’re suggesting of paying in £25k and the pension provider adding on a further 25%, your gross contribution would have been £31,250. But you haven’t put £31,250 into your pension. You’ve only put £25k into it. 

HMRC have given you the correct tax relief based on the gross pension contribution. 

QrizB

Wsb5tails said:

I wonder if someone would be kind enough to confirm the latest numbers provided by HMRC.
They say I am due £6023.60 Tax relief i.e £5000 for the £25000 Pension Contribution at 20% basic rate plus £1023 for the element taxed at 40%.

I'm glad that HMRC have recognised that your £25k didn't receive RAS, and I can't fault Linton's confirmatory calculations.