NHS pension - Tax relief on additional payments

mrkds

Last year i made some additional payments (APs) to my NHS payments. I split it into two payments, one lump sum and one in 12 month installments taken from my salary. But i am in the dark about the tax situation. 

The NHS pension website suggests that you can claim tax relief on lump sum APs by completing a self assement tax return. However as I am not self employed and my only income is my salary, i dont do self-assesment. 

Neither HMRC or NHS pensions have been very helpful. HMRC tell me that the pension provider should automatically give me tax relief, and i should contact them, but when i contacted NHS pensions, they point blank refuse to advise on anything to do with tax and referred me back to HMRC.
Rather than proceed with what I suspect will turn into a tedious game of ping-pong. I thought i'd ask here where do i stand? I havnt been able to find a clear answers on the internet.  Is the lump sum AP exempt from tax relief (this seems to contrary to the advice on  NHS pensions website and what usually happens with private pension contributions) or is the tax relief recieved  some other way ( e.g. HMRC will include it in my annual tax calculation?). Or is the only way is to do it is via self assesment ( which I've never done before).  
I will be grateful for any clarification that can be offered.

Dazed_and_C0nfused

Firstly Self Assessment isn't something specific to people who are self employed, not sure why you are making that connection?

However, a tax return shouldn't be necessary just to claim tax relief on a pension contribution.

HMRC are notorious for not understanding this type of contribution and I would say don't waste your time trying to discuss it with them as there front line staff are unlikely to tell you anything useful.  And that's despite civil servants being one of the relatively small proportion of people where this type of contribution would be made!

It isn't exempt from relief but the amount of relief due is wholly based on your personal tax position, it isn't like a relief at source contribution where the pension company adds 25%.

To determine the best way forward you could provide some additional info here.

The gross amount of the lump sum contribution (do not include the payments made via payroll).
The pay and tax figures from your 2023-24 P60.
The tax code on your 2023-24 P60.

NB.  You don't mention which tax year the contribution was paid in but I'm assuming it was 2023-24, not 2022-23.

mrkds

Dazed_and_C0nfused said:

Firstly Self Assessment isn't something specific to people who are self employed, not sure why you are making that connection?

However, a tax return shouldn't be necessary just to claim tax relief on a pension contribution.

HMRC are notorious for not understanding this type of contribution and I would say don't waste your time trying to discuss it with them as there front line staff are unlikely to tell you anything useful.  And that's despite civil servants being one of the relatively small proportion of people where this type of contribution would be made!

It isn't exempt from relief but the amount of relief due is wholly based on your personal tax position, it isn't like a relief at source contribution where the pension company adds 25%.

To determine the best way forward you could provide some additional info here.

The gross amount of the lump sum contribution (do not include the payments made via payroll).
The pay and tax figures from your 2023-24 P60.
The tax code on your 2023-24 P60.

NB.  You don't mention which tax year the contribution was paid in but I'm assuming it was 2023-24, not 2022-23.

Thanks thats very helpful

Requested details below:

The lump sum contribution was £2510
Pay: £46107 Tax paid: 6705 
Tax code C1257L
This is for tax year 2023/24

Dazed_and_C0nfused

mrkds said:

Dazed_and_C0nfused said:

Firstly Self Assessment isn't something specific to people who are self employed, not sure why you are making that connection?

However, a tax return shouldn't be necessary just to claim tax relief on a pension contribution.

HMRC are notorious for not understanding this type of contribution and I would say don't waste your time trying to discuss it with them as there front line staff are unlikely to tell you anything useful.  And that's despite civil servants being one of the relatively small proportion of people where this type of contribution would be made!

It isn't exempt from relief but the amount of relief due is wholly based on your personal tax position, it isn't like a relief at source contribution where the pension company adds 25%.

To determine the best way forward you could provide some additional info here.

The gross amount of the lump sum contribution (do not include the payments made via payroll).
The pay and tax figures from your 2023-24 P60.
The tax code on your 2023-24 P60.

NB.  You don't mention which tax year the contribution was paid in but I'm assuming it was 2023-24, not 2022-23.

Thanks thats very helpful

Requested details below:

The lump sum contribution was £2510
Pay: £46107 Tax paid: 6705 
Tax code C1257L
This is for tax year 2023/24

In that case you will get basic rate relief on the whole contribution and, after factoring in the small amount of tax you owe for 2023-24, can expect to get £499.60 back as a tax refund.

I would write to HMRC explaining you have a made a gross contribution, outside of payroll, where no tax relief was given at source and ask them to review your tax liability for 2023-24.

I would stress that no tax relief was given at source and maybe mention the Superannuation example in their own manual.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye93090

Don't be surprised if you have to explain this a couple of times but if you don't get the refund until after 31 January 2025 you will at least have the consolation of some interest being added to the refund!

Oppenheimer

mrkds said:

Last year i made some additional payments (APs) to my NHS payments. I split it into two payments, one lump sum and one in 12 month installments taken from my salary. But i am in the dark about the tax situation. 

The NHS pension website suggests that you can claim tax relief on lump sum APs by completing a self assement tax return. However as I am not self employed and my only income is my salary, i dont do self-assesment. 

Neither HMRC or NHS pensions have been very helpful. HMRC tell me that the pension provider should automatically give me tax relief, and i should contact them, but when i contacted NHS pensions, they point blank refuse to advise on anything to do with tax and referred me back to HMRC.

Rather than proceed with what I suspect will turn into a tedious game of ping-pong. I thought i'd ask here where do i stand? I havnt been able to find a clear answers on the internet.  Is the lump sum AP exempt from tax relief (this seems to contrary to the advice on  NHS pensions website and what usually happens with private pension contributions) or is the tax relief recieved  some other way ( e.g. HMRC will include it in my annual tax calculation?). Or is the only way is to do it is via self assesment ( which I've never done before). 

 

I will be grateful for any clarification that can be offered.

Easy to do.  I do not do Self Assessment (as taxed all under PAYE) and submitted a letter and evidence to HMRC part way through the tax year.  HMRC processed it no problem and I got a nice tax rebate about 6 weeks after the end of the tax year.  Feel free to use this letter template which I used and worked.  Repaying the favour as other posters in the Forum have help me over the years!

Pay As You Earn and Self Assessment

HM Revenue and Customs

BX9 1AS

United Kingdom

 

Dear Sir/Madam

 

National Insurance Number: XX XX XX XX X

 

On <DATE>, I made a gross Additional Pension Contribution of £<AMOUNT> to <NAME OF PENSION FUND> (an occupational pension scheme).

 

I would like to claim tax relief on the contribution paid.

 

I have enclosed a bank statement showing payment of £<AMOUNT> to <NAME OF PENSION FUND> and copy tax certificate from <NAME OF PENSION FUND>.

 

Many thanks for your assistance.

 

Yours sincerely

mrkds

Thats really helpful advice! Thank you.

I'll get a letter written up. Looking forward to writing and posting a physical letter for the first time in over 10 years (doesn't! look like there any e-mail contact for HMRC) 

Oppenheimer

A couple of things to bear in mind/heads up for:

• depending on whose desk within HMRC your letter lands on, it will either be processed right or wrong - over the years I made two separate additional pension lump sums - the first time it was processed no problem, the second time it took them three attempts to process it right and I have to educate and chase them up (the following point might helps with this)
• the NHS calls it an Additional Payment (or whatever) the HMRC refers to this as Retirement Annuity Payment (this is VERY important) - if you speak to HMRC say it is a Retirement Annuity Payment which should be deducted from your taxable income.

Given you are talking about the last tax year I would expect you to get a refund within weeks.

Good luck.

hugheskevi

Oppenheimer said:

A couple of things to bear in mind/heads up for:

• depending on whose desk within HMRC your letter lands on, it will either be processed right or wrong - over the years I made two separate additional pension lump sums - the first time it was processed no problem, the second time it took them three attempts to process it right and I have to educate and chase them up (the following point might helps with this)
• the NHS calls it an Additional Payment (or whatever) the HMRC refers to this as Retirement Annuity Payment (this is VERY important) - if you speak to HMRC say it is a Retirement Annuity Payment which should be deducted from your taxable income.

Given you are talking about the last tax year I would expect you to get a refund within weeks.

Good luck.

I would not say it is a Retirement Annuity Contract payment. That was a pre-1988 pension arrangement that happens to have the same tax relief treatment and so HMRC in their PAYE space use the same codings.

But a RAC is a completely different type of pension contribution to an Added Pension lump sum payment with no tax relief added, and there is a separate option for a RAC on self-assessment - if you were to fill it in as a RAC contribution on self-assessment it would trigger investigations. Presumably that is because self-assessment is a more modern system.

Oppenheimer

hugheskevi said:

Oppenheimer said:

A couple of things to bear in mind/heads up for:

• depending on whose desk within HMRC your letter lands on, it will either be processed right or wrong - over the years I made two separate additional pension lump sums - the first time it was processed no problem, the second time it took them three attempts to process it right and I have to educate and chase them up (the following point might helps with this)
• the NHS calls it an Additional Payment (or whatever) the HMRC refers to this as Retirement Annuity Payment (this is VERY important) - if you speak to HMRC say it is a Retirement Annuity Payment which should be deducted from your taxable income.

Given you are talking about the last tax year I would expect you to get a refund within weeks.

Good luck.

I would not say it is a Retirement Annuity Contract payment. That was a pre-1988 pension arrangement that happens to have the same tax relief treatment and so HMRC in their PAYE space use the same codings.

But a RAC is a completely different type of pension contribution to an Added Pension lump sum payment with no tax relief added, and there is a separate option for a RAC on self-assessment - if you were to fill it in as a RAC contribution on self-assessment it would trigger investigations. Presumably that is because self-assessment is a more modern system.

I have had two income tax recalculations within the last three years and this is what HMRC refer to it as on their documentation and also via phonecalls with HMRC staff.

Dazed_and_C0nfused

hugheskevi said:

Oppenheimer said:

A couple of things to bear in mind/heads up for:

• depending on whose desk within HMRC your letter lands on, it will either be processed right or wrong - over the years I made two separate additional pension lump sums - the first time it was processed no problem, the second time it took them three attempts to process it right and I have to educate and chase them up (the following point might helps with this)
• the NHS calls it an Additional Payment (or whatever) the HMRC refers to this as Retirement Annuity Payment (this is VERY important) - if you speak to HMRC say it is a Retirement Annuity Payment which should be deducted from your taxable income.

Given you are talking about the last tax year I would expect you to get a refund within weeks.

Good luck.

I would not say it is a Retirement Annuity Contract payment. That was a pre-1988 pension arrangement that happens to have the same tax relief treatment and so HMRC in their PAYE space use the same codings.

But a RAC is a completely different type of pension contribution to an Added Pension lump sum payment with no tax relief added, and there is a separate option for a RAC on self-assessment - if you were to fill it in as a RAC contribution on self-assessment it would trigger investigations. Presumably that is because self-assessment is a more modern system.

I agree, don't refer to it as a Retirement annuity contract/payment.

They ceased for new policies in 1988.

HMRC may use it on their system but that is not the type of contribution you have made and could well confuse/complicate things.

Oppenheimer

mrkds said:

Thats really helpful advice! Thank you.

I'll get a letter written up. Looking forward to writing and posting a physical letter for the first time in over 10 years (doesn't! look like there any e-mail contact for HMRC) 

Shame we have to do it the old fashioned way - but it works!