60% tax trap - explanation please

Bookworm105

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Taken from Tax on your private pension contributions: Tax relief - GOV.UK

If you pay Income Tax above 20% (England, Wales or Northern Ireland)

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

• 20% up to the amount of any income you have paid 40% tax on
• 25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%

yes, as it is says: You can also call or write to HMRC to claim if you pay Income Tax at 40%

Avro1995

This isnt me by the way - I am trying to just get my head round it as I am intrigued and thinking on behalf of a friend - If anyone is able to do the illustrative example I laid out in the original post I would be most grateful

Dazed_and_C0nfused

TheSpectator said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Taken from Tax on your private pension contributions: Tax relief - GOV.UK

If you pay Income Tax above 20% (England, Wales or Northern Ireland)

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

• 20% up to the amount of any income you have paid 40% tax on
• 25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%

Surely the bottom bit covers your situation? You have no SA criteria so no need to complete one to claim pension relief.

Agree, the op seems to be selective in what they are seeing.

Albermarle

If I am already contributing to my workplace scheme 5% each months (relief at source) and my employer is already doing the same .

You may wish to inform your friend, that adding only 10% to a pension would normally be seen as inadequate.
If they has a £100K pa lifestyle, then they will either get a very rude awakening when they get older, and/or have to work until they are very old.
Increasing their contribution to at least 10% would seem sensible, more if they already middle aged. 

Sarahspangles

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Avro1995 said:

Dazed_and_C0nfused said:

Employer pension contributions never impact your adjusted net income.

Your own relief at source contributions do reduce adjusted net income.  Whether they are to a separate SIPP or employment related is irrelevant if they are relief at source contributions.

Why do you compete a tax return?

Don't forget all taxable income, even interest and dividends taxed at 0%, is included in your adjusted net income.

Thanks for your reply - in this hypothetical scenario wouldn't they be able to claim back some higher rate relief in respect of their employee workplace contributions ?

Yes.  But if you explain why you are completing tax returns it might add some context that isn't clear from your original post.

I'm not completing returns - I am trying to work out in this scenario - wouldn't the person have to complete returns to get the higher rate relief - thanks

No, where have you got that impression from?

Do you meet any of the criteria to need to complete a tax return?

It says online everywhere to claim the higher rate tax relief you need to complete a self assessment - are you saying that isn't the case?

It's news to me.  Any reputable sources?

Taken from Tax on your private pension contributions: Tax relief - GOV.UK

If you pay Income Tax above 20% (England, Wales or Northern Ireland)

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

• 20% up to the amount of any income you have paid 40% tax on
• 25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%

I originally read it the same way as you, OP.  That’s a webpage that is long overdue review. It’s impossible to follow the pathway and identify action unless you already understand information not presented on the page. Terrible UI/UE.

In 2024, if .gov.uk offer a ‘call or write’ option I assume those options are for the digitally excluded and will take longer. It’s supposed to be ‘digital first’. As it is you have to type a letter, print it, buy a stamp and post it. They then scan it and update your digital record.

Rant over!