Is HMRC correct

Newhomenewsavings

Hi, 

Hoping someone can help as I've given up the phoning HMRC, I just wanted to talk to someone who knows what they're talking about. 

My husband has had a dredged letter today to say we owe HMRC £508 from the tax year 23/24. 

Bit of background I work part time earn under my personal allowance, so I signed up to marriage allowance a few years ago.

Last year my husband's wage increased, it was going to put him just into the higher 40% tax bracket (by £4000). So he decided to up his pension contributions. We're not self employed, he works for a huge company. So thought it was all taken care of. 

I might have got this wrong but I thought you were not taxed on pension contributions, as they are taken out of your gross pay. However he has paid 40% on his pension contributions, and we no longer qualify for marriage allowance, so have to pay it back. Not sure how this has amounted to £508. 

If they hadn't taken the pension contributions into consideration he would have been under the higher tax bracket.

Am I correct? and how do I go forward with HMRC? 

Dazed_and_C0nfused

Newhomenewsavings said:

Hi, 

Hoping someone can help as I've given up the phoning HMRC, I just wanted to talk to someone who knows what they're talking about. 

My husband has had a dredged letter today to say we owe HMRC £508 from the tax year 23/24. 

Bit of background I work part time earn under my personal allowance, so I signed up to marriage allowance a few years ago.

Last year my husband's wage increased, it was going to put him just into the higher 40% tax bracket (by £4000). So he decided to up his pension contributions. We're not self employed, he works for a huge company. So thought it was all taken care of. 

I might have got this wrong but I thought you were not taxed on pension contributions, as they are taken out of your gross pay. However he has paid 40% on his pension contributions, and we no longer qualify for marriage allowance, so have to pay it back. Not sure how this has amounted to £508. 

If they hadn't taken the pension contributions into consideration he would have been under the higher tax bracket.

Am I correct? and how do I go forward with HMRC? 

You seem a little confused.

£508 tax owed sounds about right for someone who provisionally received Marriage Allowance in their tax code but weren't actually eligible for it once the tax year was reviewed.

You don't pay tax on pension contributions, you get tax relief on them.

But the way you get tax relief depends on the method used to make those contributions.  Did he make separate contributions to a personal pension/SIPP or did he simply increase the amount he paid into his normal company scheme?

If the latter do you know which of these methods is used?

Net pay
Relief at source (RAS)
Salary sacrifice

If it was relief at source he would see 25% added to his contribution (not to the employers though) so if he paid say £100 then £25 in basic rate relief is added by the pension company.

Until you understand the method used you cannot get to the bottom of whether the £508 is correct or not.

Green_hopeful

I use the chat bot thing on the contact us page. If you type ‘advisor’ in the box it will put you through to a human. You sometimes have to do it a couple of times. It will ask for your name address date of birth and national insurance number so I pre type that while I am waiting for an advisor. It’s best first thing before the queues get too long. 

Dazed_and_C0nfused

Green_hopeful said:

I use the chat bot thing on the contact us page. If you type ‘advisor’ in the box it will put you through to a human. You sometimes have to do it a couple of times. It will ask for your name address date of birth and national insurance number so I pre type that while I am waiting for an advisor. It’s best first thing before the queues get too long. 

I don't think the op understand this well enough to contact HMRC yet, confusion is likely to reign until they fully understand the pension contributions element.

Albermarle

I might have got this wrong but I thought you were not taxed on pension contributions, as they are taken out of your gross pay

If this a workplace pension, then the employer has the choice of three different ways of taking your pension contributions from the salary ( as detailed in the post above).  In the end you still receive the correct amount going into your pension, whichever of the three methods is used, but there can be different effects on other issues, such as the one you highlight.
So we need to know which of the three methods is being used ( if it is a workplace pension we are talking about).