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Pension lump sum contribution tax relief query/guidance
Hi all. I'm hoping this is the most appropriate section of MSE forums.
I’m looking for some guidance or assistance on a query I have which relates to the tax relief I'm due on a lump sum pension contribution I made as a Higher Rate taxpayer.
I made a lump sum contribution of £4,200 in February 2024 to buy Added Pension as a member of the Alpha Civil Service Pension Scheme.
I recently sent a letter to HMRC to make them aware of this payment, as it did not benefit from any tax relief (both basic and higher rate) under either net pay arrangement nor relief-at-source arrangements.
I have provided a summary below of the tax calculations HMRC have undertaken in addition to a change in my tax code, and I just want to some assistance in making sense of what HMRC have taken account of before contacting them (if it’s even required).
For the tax year 2023 to 2024
Income
Company X: £60,235.94
Income Tax: £11,522.40
Untaxed Interest: £35.00
Income Tax: £0.00
Total: £60,270.94
Income Tax: £11,522.40
Less your allowances
Personal Allowance (Tapered if appropriate): £12,570.00
Total tax free amount: £12,570.00
Your total taxable income: £47,700.94
Income Tax rate(s)
Personal Savings Allowance at 0% on: £35.00
Income tax: £0.00
Basic rate at 20% on: £41,900.00
Income Tax: £8,380.00
Higher rate(s) at 40% on: £5,765.00
Income tax: £2,306.00
Total: £47,700.00
Income tax: £10,686.00
Result
Total tax payable
Income Tax: £10,686.00
Tax you have already paid
Income Tax: £11,522.40
HMRC owes you
Income Tax: £836.40
Private pension contributions
You were not given enough tax relief on your private pension contributions. You were given tax relief on contributions of £0.00, but the actual contributions you made were £4,200.00
Higher rate relief
HMRC have increased the amount of tax you pay at a basic rate from £37,700.00 to £41,900.00. This gives you higher rate relief for charitable donations or personal pension contributions (or both).
In addition to this, my tax code
has been updated from 1257L to 1467L with the following change explanation ‘You
now get Personal Pension Payments worth £2,100’
Unfortunately I’m not the most proficient with income tax, therefore I’m hoping someone can shine some light on if this has been accounted for properly and why my tax code has been changed.
Comments
-
The basic problem is they have treated your contribution as a RAS (relief at source) one where the pension company adds basic rate relief. And these contributions increase your basic rate band to allow any higher rate relief.Project9195 said:Hi all. I'm hoping this is the most appropriate section of MSE forums.
I’m looking for some guidance or assistance on a query I have which relates to the tax relief I'm due on a lump sum pension contribution I made as a Higher Rate taxpayer.
I made a lump sum contribution of £4,200 in February 2024 to buy Added Pension as a member of the Alpha Civil Service Pension Scheme.
I recently sent a letter to HMRC to make them aware of this payment, as it did not benefit from any tax relief (both basic and higher rate) under either net pay arrangement nor relief-at-source arrangements.
I have provided a summary below of the tax calculations HMRC have undertaken in addition to a change in my tax code, and I just want to some assistance in making sense of what HMRC have taken account of before contacting them (if it’s even required).
For the tax year 2023 to 2024
Income
Company X: £60,235.94
Income Tax: £11,522.40
Untaxed Interest: £35.00
Income Tax: £0.00
Total: £60,270.94
Income Tax: £11,522.40
Less your allowances
Personal Allowance (Tapered if appropriate): £12,570.00
Total tax free amount: £12,570.00
Your total taxable income: £47,700.94
Income Tax rate(s)
Personal Savings Allowance at 0% on: £35.00
Income tax: £0.00
Basic rate at 20% on: £41,900.00
Income Tax: £8,380.00
Higher rate(s) at 40% on: £5,765.00
Income tax: £2,306.00
Total: £47,700.00
Income tax: £10,686.00
Result
Total tax payable
Income Tax: £10,686.00
Tax you have already paid
Income Tax: £11,522.4
HMRC owes you
Income Tax: £836.40
Private pension contributions
You were not given enough tax relief on your private pension contributions. You were given tax relief on contributions of £0.00, but the actual contributions you made were £4,200.00
Higher rate relief
HMRC have increased the amount of tax you pay at a basic rate from £37,700.00 to £41,900.00. This gives you higher rate relief for charitable donations or personal pension contributions (or both).
In addition to this, my tax code has been updated from 1257L to 1467L with the following change explanation ‘You now get Personal Pension Payments worth £2,100’
Unfortunately I’m not the most proficient with income tax, therefore I’m hoping someone can shine some light on if this has been accounted for properly and why my tax code has been changed.
But that is not the type of contribution you made. Sadly this is a recurring error on HMRC's part, there are regular posts from people suffering the same problem.
You have two things to consider.Firstly you need the 2023-24 calculation to be corrected.Secondly you need to get your tax code adjusted back to what it was asap as that assumes you will be making more RAS contributions in the current tax year (not that you made any in the first place!).2 -
Dazed_and_C0nfused said:
The basic problem is they have treated your contribution as a RAS (relief at source) one where the pension company adds basic rate relief. And these contributions increase your basic rate band to allow any higher rate relief.Project9195 said:Hi all. I'm hoping this is the most appropriate section of MSE forums.
I’m looking for some guidance or assistance on a query I have which relates to the tax relief I'm due on a lump sum pension contribution I made as a Higher Rate taxpayer.
I made a lump sum contribution of £4,200 in February 2024 to buy Added Pension as a member of the Alpha Civil Service Pension Scheme.
I recently sent a letter to HMRC to make them aware of this payment, as it did not benefit from any tax relief (both basic and higher rate) under either net pay arrangement nor relief-at-source arrangements.
I have provided a summary below of the tax calculations HMRC have undertaken in addition to a change in my tax code, and I just want to some assistance in making sense of what HMRC have taken account of before contacting them (if it’s even required).
For the tax year 2023 to 2024
Income
Company X: £60,235.94
Income Tax: £11,522.40
Untaxed Interest: £35.00
Income Tax: £0.00
Total: £60,270.94
Income Tax: £11,522.40
Less your allowances
Personal Allowance (Tapered if appropriate): £12,570.00
Total tax free amount: £12,570.00
Your total taxable income: £47,700.94
Income Tax rate(s)
Personal Savings Allowance at 0% on: £35.00
Income tax: £0.00
Basic rate at 20% on: £41,900.00
Income Tax: £8,380.00
Higher rate(s) at 40% on: £5,765.00
Income tax: £2,306.00
Total: £47,700.00
Income tax: £10,686.00
Result
Total tax payable
Income Tax: £10,686.00
Tax you have already paid
Income Tax: £11,522.4
HMRC owes you
Income Tax: £836.40
Private pension contributions
You were not given enough tax relief on your private pension contributions. You were given tax relief on contributions of £0.00, but the actual contributions you made were £4,200.00
Higher rate relief
HMRC have increased the amount of tax you pay at a basic rate from £37,700.00 to £41,900.00. This gives you higher rate relief for charitable donations or personal pension contributions (or both).
In addition to this, my tax code has been updated from 1257L to 1467L with the following change explanation ‘You now get Personal Pension Payments worth £2,100’
Unfortunately I’m not the most proficient with income tax, therefore I’m hoping someone can shine some light on if this has been accounted for properly and why my tax code has been changed.
But that is not the type of contribution you made. Sadly this is a recurring error on HMRC's part, there are regular posts from people suffering the same problem.
You have two things to consider.Firstly you need the 2023-24 calculation to be corrected.Secondly you need to get your tax code adjusted back to what it was asap as that assumes you will be making more RAS contributions in the current tax year (not that you made any in the first place!).Hi Dazed and C0nfused. Thank you so much and that is really really helpful!!I’ll get onto HMRC in the morning on both parts. I was nervous about getting in touch without having a clue what I’m talking about, so the way you’ve broken that down is amazing, thank you!I did state quite clearly in the letter that I had received no tax relief under neither arrangement. As yoy say, seems to be a constant issue with HMRC.0 -
You could refer them to their own guidance, the third option applies here.
NB. A tax return shouldn't be needed just because of this type of pension contribution.
https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm0442101 -
Just to warn you to expect them to insist they are right and that you are wrong, and it will be hard to convince them otherwise from some past experiences.Dazed_and_C0nfused said:
The basic problem is they have treated your contribution as a RAS (relief at source) one where the pension company adds basic rate relief. And these contributions increase your basic rate band to allow any higher rate relief.Project9195 said:Hi all. I'm hoping this is the most appropriate section of MSE forums.
I’m looking for some guidance or assistance on a query I have which relates to the tax relief I'm due on a lump sum pension contribution I made as a Higher Rate taxpayer.
I made a lump sum contribution of £4,200 in February 2024 to buy Added Pension as a member of the Alpha Civil Service Pension Scheme.
I recently sent a letter to HMRC to make them aware of this payment, as it did not benefit from any tax relief (both basic and higher rate) under either net pay arrangement nor relief-at-source arrangements.
I have provided a summary below of the tax calculations HMRC have undertaken in addition to a change in my tax code, and I just want to some assistance in making sense of what HMRC have taken account of before contacting them (if it’s even required).
For the tax year 2023 to 2024
Income
Company X: £60,235.94
Income Tax: £11,522.40
Untaxed Interest: £35.00
Income Tax: £0.00
Total: £60,270.94
Income Tax: £11,522.40
Less your allowances
Personal Allowance (Tapered if appropriate): £12,570.00
Total tax free amount: £12,570.00
Your total taxable income: £47,700.94
Income Tax rate(s)
Personal Savings Allowance at 0% on: £35.00
Income tax: £0.00
Basic rate at 20% on: £41,900.00
Income Tax: £8,380.00
Higher rate(s) at 40% on: £5,765.00
Income tax: £2,306.00
Total: £47,700.00
Income tax: £10,686.00
Result
Total tax payable
Income Tax: £10,686.00
Tax you have already paid
Income Tax: £11,522.4
HMRC owes you
Income Tax: £836.40
Private pension contributions
You were not given enough tax relief on your private pension contributions. You were given tax relief on contributions of £0.00, but the actual contributions you made were £4,200.00
Higher rate relief
HMRC have increased the amount of tax you pay at a basic rate from £37,700.00 to £41,900.00. This gives you higher rate relief for charitable donations or personal pension contributions (or both).
In addition to this, my tax code has been updated from 1257L to 1467L with the following change explanation ‘You now get Personal Pension Payments worth £2,100’
Unfortunately I’m not the most proficient with income tax, therefore I’m hoping someone can shine some light on if this has been accounted for properly and why my tax code has been changed.
But that is not the type of contribution you made. Sadly this is a recurring error on HMRC's part, there are regular posts from people suffering the same problem.
You have two things to consider.Firstly you need the 2023-24 calculation to be corrected.Secondly you need to get your tax code adjusted back to what it was asap as that assumes you will be making more RAS contributions in the current tax year (not that you made any in the first place!).Hi Dazed and C0nfused. Thank you so much and that is really really helpful!!I’ll get onto HMRC in the morning on both parts. I was nervous about getting in touch without having a clue what I’m talking about, so the way you’ve broken that down is amazing, thank you!I did state quite clearly in the letter that I had received no tax relief under neither arrangement. As yoy say, seems to be a constant issue with HMRC.
This thread on the same topic from a few years ago has links to all the relevant rules you might want to cite, although it may well be of little use. It is also useful background as to how you can expect a conversation with HMRC on this to go and how to eventually get things corrected.1 -
Thanks both. Looks like I potentially have a battle on my hands, but I’ll have a good read of the previous thread to understand the issue in greater depth to set the scene.Really appreciate your assistance, incredibly helpful1
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