Pension Tax Relief

GPKett

Hi,

I don't really understand pensions in terms of tax so i'm after some help if possible.

I am fortunate enough to be a higher rate tax payer and i'm enrolled in our company pension. Through chance conversation i heard that, as i higher rate tax payer, i can claim additional tax relief.

I have no idea what this means or what i need to do.

Is it possible i am already getting this, and if so how do i check?

How do i claim? i was filling in a self assessment as we were getting child benefit which we weren't eligible for. We have stopped the child benefit so was hoping to not have to fill in a self assessment going forward. is this the only way?

is it an adjustment to my tax code or do i get a refund every year?

i haven't claimed anything for 4 years when i potentially could have. can i back claim? 

what am i expecting in real terms? say i earn't 70k last year and paid 4% into my pension

any help on this is much appreciated.

thanks

Gareth

jem16

First thing to check is how you’ve paid your pension contributions. If they’ve been taken before tax has been paid then you’re due no extra tax relief as you’re already getting it. If they’re paid after tax is taken and the pension provider adds on the basic rate tax relief then you would have to inform HMRC and claim the extra tax relief due. 

Dazed_and_C0nfused

Before doing anything else you need to understand which method is used to get money into your pension.  You only ever need to do anything with relief at source, with the others you get the maximum tax benefit immediately.

Net pay
Relief at source
Salary sacrifice 

xylophone

I don't really understand pensions in terms of tax so i'm after some help if possible.

See

https://www.litrg.org.uk/tax-guides/tax-basics/do-i-have-join-pension-scheme/do-you-know-how-tax-relief-your-pension

MallyGirl

do you no longer claim child benefit because you are both earning, or the child is too old, or because you earn too much?
If the latter then your partner, if not working, can opt to not receive the money but still get the NI credit.

GPKett

thanks. we no longer claim child benefit because i earn too much. One of our children is disabled and my wife stopped working and claims carer's allowance so it still counts towards years for her state pension

GPKett

for my pension. its been explained to me that my contribution is 5%, 4% is taken off my wage and the other 1% is paid into my pension my the government. Not sure if this means it is net pay, relief at source or something else, and if i need to do anything around the higher rate tax relief?

Albermarle

GPKett said:

for my pension. its been explained to me that my contribution is 5%, 4% is taken off my wage and the other 1% is paid into my pension my the government. Not sure if this means it is net pay, relief at source or something else, and if i need to do anything around the higher rate tax relief?

One way to find out is to check on the pension providers website ( you should have sign on details)
Look at  your monthly  account payments in . You should see one of the following:
1) Only an employer payment each month- this is salary sacrifice
2) An employer and an employee payment, but nothing else- this is Net pay 
3) An employer and an employee payment and money added as tax relief ( maybe not on the latest payment as it can take time to arrive) this is relief at source, and this is where you need to then also claim higher rate tax relief ( because the tax relief added to the pension is only at the basic rate.

For 1) and 2) there is no additional tax relief to claim.

As a separate item, adding only 5% to a pension is widely regarded as being too low to build up a decent pot.( unless your employer is unusually generous with their contributions)
For higher rate taxpayers adding more to a pension is usually a bit of a no brainer, as  higher rate tax relief is very generous.

Albermarle

Beddie said:

Quick and simple answer - you're already getting the full 40% tax relief, as it's taken from your pre-tax salary. There is nothing else you need to do.

As said above, you really need to pay more in if you can, 10% would be a better amount. Speak to your employer about it.

There is nothing in the OP's posts to confirm they are paying contributions from pre tax salary.
In fact their comment its been explained to me that my contribution is 5%, 4% is taken off my wage and the other 1% is paid into my pension my the government
Would indicate it is post tax but they need to check to be sure .

GPKett

hi, its option 3. i can see on the statement:

Regular Contribution (Employer)
Regular Contribution (Employee)
Tax relief

what do i need to do now?

ref putting in more money. my company puts in 7%. as my wife has stopped working to look after our son, we dont have a lot of spare cash and any we do have i was overpaying the mortgage as i though this was the best option(??)

jem16

GPKett said:

hi, its option 3. i can see on the statement:

Regular Contribution (Employer)
Regular Contribution (Employee)
Tax relief

what do i need to do now?

ref putting in more money. my company puts in 7%. as my wife has stopped working to look after our son, we dont have a lot of spare cash and any we do have i was overpaying the mortgage as i though this was the best option(??)

Just contact HMRC and say that you wish to claim higher rate tax relief on a Relief at Source pension scheme. Give them the gross amount of your contributions - ie your contribution plus tax relief. They will then adjust your tax code going forward. You can also claim for the previous years, I think it’s previous 4 but they will clarify. You should get that as a refund.