Pension Tax Relief

Albermarle

jem16 said:

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. 

As above but note two things;
1) You can not get back more higher rate relief than higher rate tax you have paid in a tax year.
2) Going forward your tax code will be adjusted for subsequent years on the assumption you will make the same level of contributions. So you will get more take home pay but not be due any rebate.

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(??)
There are lots of threads on here debating overpaying mortgage or adding to pension.
It depends on your mortgage rate, your job security etc 
However being a higher rate taxpayer would normally tip it in favour of the pension, as the higher rate relief is very generous. Also 12% in a pension would normally be seen as not really enough to build up a good pot, if you wanted to retire early for example.
It is also an emotional thing for some people to get the mortgage paid off, where rationally it is not always the best thing.

xylophone

You mention that you are in self assessment.

Presumably you have been filling in the pension contributions box.

Are you sure that you are not already receiving higher rate relief through your tax code?

Dazed_and_C0nfused

xylophone said:

You mention that you are in self assessment.

Presumably you have been filling in the pension contributions box.

Are ypu sure that you are not already receiving higher rate relief through your tax code?

I suspect the op has been filing incorrect returns and will either need to amend or make overpayment relief claims for some years.

GPKett

I rang them, and possibly been fobbed off in to sending a letter with the details, although to be fair i didn't have all the calculations ready. i have written the letter and will see how i get on.

Correct, i have been filing incorrect returns, i was only concentrating on doing them for the child benefit. they said that these would need to be amended but that they would do it when they get the letter.

your right ref the pension vs mortgage. it might be more emotional. The fear is that even though i believe i am secure in my job, apart from the benefits my wife gets, my wage is whats paying the mortgage etc and the possibility of losing that (whilst i would apply for jobs straight away) has it in my head that we need to pay the mortgage off straight ASAP. take the pressure off etc. The reality of the best option might be different. the thought process was pay off the mortgage, then increase the pension contributions.

xylophone

https://www.theprivateoffice.com/pensions/how-be-tax-efficient-your-pension-contributions

GPKett

ref "Also 12% in a pension would normally be seen as not really enough to build up a good pot, if you wanted to retire early for example."
what would be enough as a percentage?

Albermarle

GPKett said:

ref "Also 12% in a pension would normally be seen as not really enough to build up a good pot, if you wanted to retire early for example."
what would be enough as a percentage?

It will vary for everybody . Some will be bigger spenders than others, and some will have a desire to retire as early as possible, and others will work until they can not any longer.

The main point is that in general people underestimate how big a pot they need to retire in the manner to which they have become accustomed, and also underestimate how long they are likely to live.

One rule of thumb is that if you want to generate from a pension pot £1000 pa linked to inflation, without the pot running out, you need about £25,000.
So a pot of £250K could generate £10K pa ( or thereabouts) 
You will get the state pension probably at 67 which is currently about £10K pa, plus you may other savings.
Studies show that for a nice comfortable retirement, a couple need an income of about £50K pa, but clearly many are OK on less than that. 

So maybe you can work back from these figures, and get an idea of how much you need to build up in an ideal world.

This forum is a useful resource as there are many discussions on similar topics. 

Obviously it is not easy with the family situation, but ideally you do not want to reach your sixties and looking to retire and finding out you do not have enough to do that. Best to give it some thought now.

Qyburn

GPKett said:

ref "Also 12% in a pension would normally be seen as not really enough to build up a good pot, if you wanted to retire early for example."
what would be enough as a percentage?

Does your pension plan give you any form of forecast or projection? 

GPKett

Hi,

HMRC called me on the back of my letter and said i needed to re-open my self assessments for the last few years and add the details in there. I cant find this section for some reason, can anybody help?

thanks

Gareth

Dazed_and_C0nfused

GPKett said:

Hi,

HMRC called me on the back of my letter and said i needed to re-open my self assessments for the last few years and add the details in there. I cant find this section for some reason, can anybody help?

thanks

Gareth

No idea why they have told you that, or maybe you haven't quite given us the full picture.

You can only amend the 2021-22 and 2022-23 return (if already submitted).  And you only have until 31 January 2024 to amend the 2021-22 return.

For the previous two tax years you have to make a claim for overpayment relief.  This is in a prescribed format, set out on gov.uk.  The "Write to HMRC" section here explains this.

https://www.gov.uk/self-assessment-tax-returns/corrections