PAYE Tax code change due to pension payments

MoneyPleaseHelp

Good Afternoon

After speaking with HMRC, they are changing my tax code next year to consider the extra relief as I am in the 40% tax band for pension payments.

I cannot work it out, but they say they are correct.

Yearly Salary 
£70560
Yearly Pension payments
Company Gross £2822 pension is deducted after tax,
Private SIPP Gross £2500
no other contributions, not company cars or anything else 

They have changed my code to 
1589L

Listing £3327 in personal pension payments

anyone help me out on the maths here so I can check it right

I appreciate any help you can provide.

BoGoF

Are you sure the £2822 is gross? When you say paid after tax that would imply relief at source scheme where tax relief would be added. How much was actually paid from your net pay?

Dazed_and_C0nfused

MoneyPleaseHelp said:

Good Afternoon

After speaking with HMRC, they are changing my tax code next year to consider the extra relief as I am in the 40% tax band for pension payments.

I cannot work it out, but they say they are correct.

Yearly Salary 
£70560
Yearly Pension payments
Company Gross £2822 pension is deducted after tax,
Private SIPP Gross £2500
no other contributions, not company cars or anything else 

They have changed my code to 
1589L

Listing £3327 in personal pension payments

anyone help me out on the maths here so I can check it right

I appreciate any help you can provide.

What exactly do you mean by this?

Is this a pension contribution you have made or the company (employer) has made?

If it is a contribution you have made i.e. it is not salary sacrifice then have you received 25% extra in your pension fund?

Like you will with the £2000 (net) SIPP contribution you intend to make.

[Deleted User]

Difficult to be absolutely certain that the figures provided are gross or net.

However, if the £2500 and £2822 are grossed up for basic rate tax, they become £6652 in total. You would be entitled to claim an additional 20% relief which equates to £1330.40. 

Your code has been adjusted to give an additional allowance of £3327. As a 40% taxpayer your tax would be reduced by £1330.80. 

So, one of the following must be true


a) the £2500 and £2822 are net payments grossed up as I have done 

b) They are grossed up payments as you have stated and HMRC are wrong and have made the incorrect adjustment or have misunderstood 

c) My assumptions give rise to an amazing coincidence 

MoneyPleaseHelp

[Deleted User] said:

Difficult to be absolutely certain that the figures provided are gross or net.

However, if the £2500 and £2822 are grossed up for basic rate tax, they become £6652 in total. You would be entitled to claim an additional 20% relief which equates to £1330.40. 

Your code has been adjusted to give an additional allowance of £3327. As a 40% taxpayer your tax would be reduced by £1330.80. 

So, one of the following must be true


a) the £2500 and £2822 are net payments grossed up as I have done 

b) They are grossed up payments as you have stated and HMRC are wrong and have made the incorrect adjustment or have misunderstood 

c) My assumptions give rise to an amazing coincidence 

Thank you i think

That makes sense now

I told HMRC the payments I made without any relief on them, so what I actually paid. I am right. This is gross ?.

MoneyPleaseHelp

£2500 and £2822 are what i actually pay 

BoGoF

MoneyPleaseHelp said:

£2500 and £2822 are what i actually pay 

So that will be the net amounts and Ferro is correct in his observations above and all is correct with your tax code once grossed up.

Dazed_and_C0nfused

MoneyPleaseHelp said:

£2500 and £2822 are what i actually pay 

But do you definitely get 25% added to both those amounts within your pension fund?

MoneyPleaseHelp

I think with your help i understand now 

I pay 2500 +2822 = 5322 multiple by 25% £6652.5 
20% extra relief is £1330.40

I don't understand where the £3327 comes from 
Your code has been adjusted to give an additional allowance of £3327. As a 40% taxpayer, your tax would be reduced by £1330.80. 

[Deleted User]

MoneyPleaseHelp said:

I think with your help i understand now 

I pay 2500 +2822 = 5322 multiple by 25% £6652.5 
20% extra relief is £1330.40

I don't understand where the £3327 comes from 
Your code has been adjusted to give an additional allowance of £3327. As a 40% taxpayer, your tax would be reduced by £1330.80. 

The 3327 is the deduction required to grant you tax relief of £1330.40 (or as near as possible). Why, therefore, it isn’t 3326 is probably not worth the wastage of brain cells. 

MoneyPleaseHelp

[Deleted User] said:

MoneyPleaseHelp said:

I think with your help i understand now 

I pay 2500 +2822 = 5322 multiple by 25% £6652.5 
20% extra relief is £1330.40

I don't understand where the £3327 comes from 
Your code has been adjusted to give an additional allowance of £3327. As a 40% taxpayer, your tax would be reduced by £1330.80. 

The 3327 is the deduction required to grant you tax relief of £1330.40 (or as near as possible). Why, therefore, it isn’t 3326 is probably not worth the wastage of brain cells. 

Is there a calculation to work out the £3327 as that's what I am getting stuck on how to get to that figure