Private Pensions contributions - dealing with HMRC

Redscope77

Hi All
I am a higher rate tax payer (40%)

I am lucky enough to have 100k that I would like to transfer into my private pension pot.
To smooth the investment out I will transfer £4,167 per month for 24 months.  

My private pension provider will automatically apply the standard 25% tax relief to the contribution.  

Given I am in the 40% tax bracket how do I go about adjusting my tax code to account for my missing tax relief.    

Any advice ?

[Deleted User]

Either write to HMRC or, preferably, ring them. 

Best at 8am prompt - before most know that they are open! 

BoGoF

Are you already contributing to an employer's scheme?

Dazed_and_C0nfused

Redscope77 said:

Hi All
I am a higher rate tax payer (40%)

I am lucky enough to have 100k that I would like to transfer into my private pension pot.
To smooth the investment out I will transfer £4,167 per month for 24 months.  

My private pension provider will automatically apply the standard 25% tax relief to the contribution.  

Given I am in the 40% tax bracket how do I go about adjusting my tax code to account for my missing tax relief.    

Any advice ?

You only get 20% tax relief with relief at source contributions.  This is 25% of what you pay but only 20% of the gross contribution.

For example you pay £3,000 and £750 is added making a gross contribution of £3,750.  £750 is 20% of the £3,750.

You will need to contact HMRC with details of the gross RAS contribution you expect to pay in each tax year and they will provisionally adjust your tax code to allow any higher rate relief due.

Making sure they have as accurate as possible estimates of your earnings (P60 taxable pay figure) is a good idea.

And don't forget any higher rate relief is limited by the amount of higher rate tax you would otherwise be liable to, it's not always an extra 20%.

eskbanker

Redscope77 said:

I am a higher rate tax payer (40%)

I am lucky enough to have 100k that I would like to transfer into my private pension pot.
To smooth the investment out I will transfer £4,167 per month for 24 months.  

Are you earning enough salary to gain tax relief on £62.5K of annual gross contributions over and above those already being made as a matter of course under your employment arrangements?

Redscope77

eskbanker said:

Redscope77 said:

I am a higher rate tax payer (40%)

I am lucky enough to have 100k that I would like to transfer into my private pension pot.
To smooth the investment out I will transfer £4,167 per month for 24 months.  

Are you earning enough salary to gain tax relief on £62.5K of annual gross contributions over and above those already being made as a matter of course under your employment arrangements?

What would be the minimum I would need to earn ? 

eskbanker

Redscope77 said:

eskbanker said:

Redscope77 said:

I am a higher rate tax payer (40%)

I am lucky enough to have 100k that I would like to transfer into my private pension pot.
To smooth the investment out I will transfer £4,167 per month for 24 months.  

Are you earning enough salary to gain tax relief on £62.5K of annual gross contributions over and above those already being made as a matter of course under your employment arrangements?

What would be the minimum I would need to earn ? 

The gross total of all the contributions you and your employer make to your pension(s)!

You can get tax relief on private pension contributions worth up to 100% of your annual earnings.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Albermarle

Plus the maximum that can be added to a pension(s) per tax year is £60K . This includes your contributions, tax relief added to the pension and employer contributions.
However if you added less than £40K during the last 3 years you can carry forward unused allowance.

This is a separate issue from how much tax relief you can get, as mentioned in the previous posts.

Janin1992

Consider leveraging the salary sacrifice option offered by your company. For instance, if you earn £70K annually, you could opt to sacrifice £50K per year for two years, directing this £100K into your pension fund. By doing so, you not only benefit from income tax savings but also from National Insurance savings. Additionally, depending on your company's policies, they may contribute the employer's saved NI amount to your pension fund as well. It's important to note that if you contribute directly to your pension provider without utilizing salary sacrifice, you won't be able to reclaim NI contributions.

Redscope77

Janin1992 said:

Consider leveraging the salary sacrifice option offered by your company. For instance, if you earn £70K annually, you could opt to sacrifice £50K per year for two years, directing this £100K into your pension fund. By doing so, you not only benefit from income tax savings but also from National Insurance savings. Additionally, depending on your company's policies, they may contribute the employer's saved NI amount to your pension fund as well. It's important to note that if you contribute directly to your pension provider without utilizing salary sacrifice, you won't be able to reclaim NI contributions.

Thanks but I want to get tax relief on the 100k I have hence why I want to invest it into my private pension. 

Janin1992

Thanks but I want to get tax relief on the 100k I have hence why I want to invest it into my private pension. 

Consider 2 scenarios.

Scenario 1. You earn £70K per year and pay income tax and NI. You then pay £40K from £100K savings into pension and provider adds £10K on top, you then either adjust your tax code or fill self-assessment to get back the tax you paid at 40%. The outcome of that is that you got back income tax, but lost NI and you also needed to do lots of work to get the correct amount of tax paid.

Scenario 2. You ask your employer to salary sacrifice such amount as to make them pay £4166.67 per month into the pension and you use your £100K savings to compensate the loss of salary. You still end up with £50K in the pension pot but not only you saved the income tax, you also saved NI you lost in the first scenario, and depending on your company policy you could get a nice bonus in the form of employer's NI (what is it currently 13.8%?) which you do not get in the first scenario. You also do not need to inform HMRC to make sure that the correct amount of tax is paid.

I probably do not understand your requirements but for me using a salary sacrifice if available is a no brainer solution to feed £100K savings into the pension in the most tax efficient way