I think I owe HMRC money, but they disagree. Who is correct?

StephenWGC

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Dazed_and_C0nfused

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

StephenWGC

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Thank you for the response Dazed_and_C0nfused. In my Self Assessment form, I filled in the following information:

- I included the relevant payments in the section under “Tax reliefs” called “Paying into registered pension schemes and overseas pension schemes”,

- In “Any other information” I wrote a statement explaining the payments made

- In the “Additional information” section, I completed the “Pension savings tax charges” section.

Any further thoughts would be gratefully received.

Dazed_and_C0nfused

StephenWGC said:

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Thank you for the response Dazed_and_C0nfused. In my Self Assessment form, I filled in the following information:

- I included the relevant payments in the section under “Tax reliefs” called “Paying into registered pension schemes and overseas pension schemes”,

- In “Any other information” I wrote a statement explaining the payments made

- In the “Additional information” section, I completed the “Pension savings tax charges” section.

Any further thoughts would be gratefully received.

Can you provide (non personal) details of what you entered in that section?

And what exactly does your SA302 calculation show?

StephenWGC

Dazed_and_C0nfused said:

StephenWGC said:

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Thank you for the response Dazed_and_C0nfused. In my Self Assessment form, I filled in the following information:

- I included the relevant payments in the section under “Tax reliefs” called “Paying into registered pension schemes and overseas pension schemes”,

- In “Any other information” I wrote a statement explaining the payments made

- In the “Additional information” section, I completed the “Pension savings tax charges” section.

Any further thoughts would be gratefully received.

Can you provide (non personal) details of what you entered in that section?

And what exactly does your SA302 calculation show?

In the Additional Information Section entitled Pension Savings Tax charges, for question 10 (“Amount saved towards your pension, in the period covered by this tax return, in excess of the Annual Allowance”) I entered the total one-off payment I paid into the pension scheme (£90,000) and to question 11 (“Annual Allowance tax paid or payable by your pension scheme”) I entered the tax relief amount that my pension provider added (£22,500).

The calculation I received is the following:

This section provides you with a breakdown of your full calculation. If it says your tax return is 100% complete then you have submitted your return and this is a copy of the information held on your official online Self Assessment tax account with HM Revenue and Customs.

Interest from UK banks, building societies and securities etc £XXXX

Dividends from UK companies £XXX

Total income received £XXXX

minus Personal Allowance £12,570.00

Total income £0.00

How we have worked out your income tax

Your basic rate limit has been increased by £116,100.00 to £153,800.00 for pension payments.

This reduces the amount of income charged to higher rates of tax.

Gains on life insurance policies etc. with tax treated as paid:

Starting rate £0.00 x 0% £0.00

Basic rate band at nil rate £0.00 x 0% £0.00

Basic rate £0.00 x 20% £0.00

Higher rate band at nil rate £0.00 x 0% £0.00

Higher rate £0.00 x 40% £0.00

Additional rate £0.00 x 45% £0.00

Income Tax charged after allowances and reliefs £0.00

Income Tax due £0.00

I am most appreciative of your help with this matter.

zagfles

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Why would OP need to fill in the annual allowance charge section? The AA has not been exceeded from what OP posts as they'll have enough carry forwards. That section is not relevant if you just exceed the tax relief limit. I really thought regulars here now understood the difference between the tax relief limit and the AA.

zagfles

StephenWGC said:

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Thank you for the response Dazed_and_C0nfused. In my Self Assessment form, I filled in the following information:

- I included the relevant payments in the section under “Tax reliefs” called “Paying into registered pension schemes and overseas pension schemes”,

- In “Any other information” I wrote a statement explaining the payments made

- In the “Additional information” section, I completed the “Pension savings tax charges” section.

Any further thoughts would be gratefully received.

I'm surprised the tax return doesn't sort this out by spotting you have no relevant earnings but way exceeded the tax relief limit. Sounds like it's not that clever. The "pension savings tax charges" section is not relevant, that concerns the annual allowance and lifetime allowance. Not the tax relief limit.

You need to tell your pension provider that you exceeded the tax relief limit. If you read their terms they'll probably say you mustn't contribute more than the tax relief limit ie £3600 gross/100% of relevant earnings.

zagfles

StephenWGC said:

Dazed_and_C0nfused said:

StephenWGC said:

Dazed_and_C0nfused said:

StephenWGC said:

As a non-working mother, I have a personal pension plan, and for the last 20 years I have paid £2,880 annually into this pension (which remains untouched), and each year my pension company has claimed tax relief to make this figure up to £3,600.

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

However, having submitted my ‘22/‘23 tax return, including details of this payment, the online revenue calculation shows that I owe nothing. A recent lengthy telephone conversation with the HMRC self-assessment helpline also resulted in HMRC concluding that I did not owe them anything.

Despite this HMRC position, should I pay the amount I believe I owe to HMRC, or are they correct and I owe nothing?

Appreciate any advice.

Did you just complete the pension contribution section or the additional annual allowance charge section?

I suspect you have (inadvertently) confused whoever you spoke to in HMRC and they are simply telling you what your own Self Assessment return shows, not what it should show.

You should also fill in the ‘Additional

information’ pages if you:

• wish to claim

  – Married Couple’s Allowance

  – employment deductions

– tax reliefs, for example, on maintenance

payments or certain investments

– relief for losses from other income

  – relief now for the 2023 to 2024 tax year

trading losses or certain capital losses

• are liable to pension savings tax charges, for

example, the annual allowance charge (including

overseas pension schemes)

• need to tell us about a tax avoidance scheme

Thank you for the response Dazed_and_C0nfused. In my Self Assessment form, I filled in the following information:

- I included the relevant payments in the section under “Tax reliefs” called “Paying into registered pension schemes and overseas pension schemes”,

- In “Any other information” I wrote a statement explaining the payments made

- In the “Additional information” section, I completed the “Pension savings tax charges” section.

Any further thoughts would be gratefully received.

Can you provide (non personal) details of what you entered in that section?

And what exactly does your SA302 calculation show?

In the Additional Information Section entitled Pension Savings Tax charges, for question 10 (“Amount saved towards your pension, in the period covered by this tax return, in excess of the Annual Allowance”) I entered the total one-off payment I paid into the pension scheme (£90,000) and to question 11 (“Annual Allowance tax paid or payable by your pension scheme”) I entered the tax relief amount that my pension provider added (£22,500).

That is totally wrong.

For a start, you haven't exceeded the annual allowance. If you've only been putting £3600 a year into a pension for the last 20 years, and now do a one off of £90k, then you have enough carry forwards.

Then you've entered the tax relief in the "annual allowance tax paid by the scheme"! The scheme have NOT paid annual allowance tax, they've just given you tax relief! That section is if you exceed the AA and ask the scheme to pay the AA charge on your behalf. You've not done that.

Why did you make the £90k contribution? Exceeding the tax relief limit is usually a bad idea. Sometimes it can be a good idea in niche circumstances if you understand what you're doing. But to be blunt, it doesn't look like you do!

You really need to read the terms of your pension provider. It'll almost certainly say something like this (from II): "We will assume, unless you notify us to the contrary, all Contributions paid by you are eligible for Tax Relief, and it is your responsibility to let us know if this is incorrect"

The good news is that you can ask them for a refund of the contribution (minus the tax relief they claimed, obviously).

artyboy

Why would anyone pay £90k into a pension when they could (ok... 'should') not gain any tax advantage on the way in, but could well incur a tax liability on the way out?

xylophone

https://thepeoplespension.co.uk/help/knowledgebase/whats-the-maximum-amount-i-can-pay-into-my-pension-pot/

You can pay as much as you like into your pot, but there are limits to how much tax relief you can receive. If you’re under 75, you’re eligible to pay in up to 100% of your UK taxable earnings or £3,600 gross (whichever is higher) and receive tax relief on your contributions.

The OP has stated that she has no relevant earnings and  up to 23/24   simply availed herself of the  "basic amount" concession  to claim tax relief.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

But

In the tax year 22/23, in addition to my regular payments, I made a one-off pension contribution of £90,000. My pension company have added £22,500 tax relief to this payment, and I was expecting to have to refund HMRC for this tax relief.  

https://www.ii.co.uk/pensions/contributions/overpaid-contributions#:~:text=Normally, HMRC will simply add,you pay on your income).

What happens if I make a pension overpayment?

Thankfully there aren’t any punitive charges levelled at people that accidentally make an overpayment of pension contributions.

Normally, HMRC will simply add the overpayment to your income for the year and you’ll need to pay tax on it at your marginal rate (the highest rate of tax you pay on your income).

I am wondering why the OP did not consult the pension provider before making a non tax relievable contribution.

I am also wondering why HMRC did not pick up on the fact that she did not have the "relevant earnings" to support the contribution.

The OP is a non earner so it is somewhat surprising that she is in self assessment (unless she has substantial income from other sources).

If she does have such income, perhaps this is why the overpayment has apparently gone unnoticed?

At all events, it  seems clear that she is not entitled to the tax relief. She could contact the pension provider in the first instance but it may be that she would be advised to speak to HMRC and explain the circumstances.

zagfles

I wonder if the tax return said nothing to pay because the excess tax relief cancelled with the tax the OP mistakenly claimed the scheme paid on her behalf!