Adjusted tax code from HMRC

noclaf

Question regarding 24-25 tax year and savings interest..for continuity posting on my OP.

Let's assume my end of 24-25 tax year savings interest hits £4k and taxable PAYE income from sole job is £93k = total £97k

My tax code has been adjusted on 1 Jan 2025 by HMRC based on savings interest from the previous tax year and aware it will be re-reviewed by HMRC post end of 24-25 tax year.

Is there any point making any further contributions to my pension before end of the tax year.....can I 'offset' the tax due on the savings interest or has the proverbial horse left the barn?

It's too late to use work pension salary sac as past cut-off so would not see any NI saving benefit (as well as tax), it's just my SIPP but based on the numbers I posted above not sure if any further benefit is worthwhile? The numbers are ballpark...I envisage will land just below £100k taxable income based on my rough calculations.

Dazed_and_C0nfused

noclaf said:

Question regarding 24-25 tax year and savings interest..for continuity posting on my OP.

Let's assume my end of 24-25 tax year savings interest hits £4k and taxable PAYE income from sole job is £93k = total £97k

My tax code has been adjusted on 1 Jan 2025 by HMRC based on savings interest from the previous tax year and aware it will be re-reviewed by HMRC post end of 24-25 tax year.

Is there any point making any further contributions to my pension before end of the tax year.....can I 'offset' the tax due on the savings interest or has the proverbial horse left the barn?

It's too late to use work pension salary sac as past cut-off so would not see any NI saving benefit (as well as tax), it's just my SIPP but based on the numbers I posted above not sure if any further benefit is worthwhile? The numbers are ballpark...I envisage will land just below £100k taxable income based on my rough calculations.

It is unlikely you can do anything to change the tax due on the interest as that is taxed after the earnings.

But extra pension contributions to a personal pension/SIPP would increase your basic rate band and reduce your overall liability as you have more income taxed at 20% and less at 40%.

The only impact that would have on your interest is if you were talking about contributing £45k+ which I presume isn't the case.  Although I haven't read through the previous 3 pages so I could be missing something.

noclaf

Dazed_and_C0nfused said:

It is unlikely you can do anything to change the tax due on the interest as that is taxed after the earnings.

But extra pension contributions to a personal pension/SIPP would increase your basic rate band and reduce your overall liability as you have more income taxed at 20% and less at 40%.

The only impact that would have on your interest is if you were talking about contributing £45k+ which I presume isn't the case.  Although I haven't read through the previous 3 pages so I could be missing something.

Thanks DandC, thought that was the case and no not planning to put in £45k..wish I could but 15ish yrs away from retirement and don't think I can be shifting that much in yet! Trying to strike a balance between pension and building up S&SISA.

Dazed_and_C0nfused

noclaf said:

Dazed_and_C0nfused said:

It is unlikely you can do anything to change the tax due on the interest as that is taxed after the earnings.

But extra pension contributions to a personal pension/SIPP would increase your basic rate band and reduce your overall liability as you have more income taxed at 20% and less at 40%.

The only impact that would have on your interest is if you were talking about contributing £45k+ which I presume isn't the case.  Although I haven't read through the previous 3 pages so I could be missing something.

Thanks DandC, thought that was the case and no not planning to put in £45k..wish I could but 15ish yrs away from retirement and don't think I can be shifting that much in yet! Trying to strike a balance between pension and building up S&SISA.

The pension is very tax efficient even if not impacting the tax due on the savings.

You could be getting £10k into a SIPP for an initial outlay of £8k and, from what you've posted, £2k reduction to your tax liability.

So £10k in the pension for a real cost of £6k 😉

noclaf

Dazed_and_C0nfused said:

noclaf said:

Dazed_and_C0nfused said:

It is unlikely you can do anything to change the tax due on the interest as that is taxed after the earnings.

But extra pension contributions to a personal pension/SIPP would increase your basic rate band and reduce your overall liability as you have more income taxed at 20% and less at 40%.

The only impact that would have on your interest is if you were talking about contributing £45k+ which I presume isn't the case.  Although I haven't read through the previous 3 pages so I could be missing something.

Thanks DandC, thought that was the case and no not planning to put in £45k..wish I could but 15ish yrs away from retirement and don't think I can be shifting that much in yet! Trying to strike a balance between pension and building up S&SISA.

The pension is very tax efficient even if not impacting the tax due on the savings.

You could be getting £10k into a SIPP for an initial outlay of £8k and, from what you've posted, £2k reduction to your tax liability.

So £10k in the pension for a real cost of £6k 😉

Aware that the pension is generally the most tax efficient wrapper especially being in the 40% tax bracket however I tend to worry about how long I can maintain current earnings (career longevity) and never know when the pension rules will be tinkered with e.g age it can be accessed.  Hence for the last two tax years, my only objective was to keep taxable income below £100k. 

Using your example above (£10k in pension for real cost £6k) and just so I understand this correctly* in ref. to current tax year:
- I add £8k to my SIPP before end of this tax yr
- SIPP platform will claim 20% tax (BR) on my behalf
- for the other 20% tax relief, would I need to inform HMRC? I ask this as haven't completed SA for the last few years (HMRC never asked me to) so assume need to inform HMRC somehow so they can apply the other 20% to my tax code?

*Aware my understanding of this topic and the tax relief part might be incorrect....work in progress!

Dazed_and_C0nfused

noclaf said:

Dazed_and_C0nfused said:

noclaf said:

Dazed_and_C0nfused said:

It is unlikely you can do anything to change the tax due on the interest as that is taxed after the earnings.

But extra pension contributions to a personal pension/SIPP would increase your basic rate band and reduce your overall liability as you have more income taxed at 20% and less at 40%.

The only impact that would have on your interest is if you were talking about contributing £45k+ which I presume isn't the case.  Although I haven't read through the previous 3 pages so I could be missing something.

Thanks DandC, thought that was the case and no not planning to put in £45k..wish I could but 15ish yrs away from retirement and don't think I can be shifting that much in yet! Trying to strike a balance between pension and building up S&SISA.

The pension is very tax efficient even if not impacting the tax due on the savings.

You could be getting £10k into a SIPP for an initial outlay of £8k and, from what you've posted, £2k reduction to your tax liability.

So £10k in the pension for a real cost of £6k 😉

Aware that the pension is generally the most tax efficient wrapper especially being in the 40% tax bracket however I tend to worry about how long I can maintain current earnings (career longevity) and never know when the pension rules will be tinkered with e.g age it can be accessed.  Hence for the last two tax years, my only objective was to keep taxable income below £100k. 

Using your example above (£10k in pension for real cost £6k) and just so I understand this correctly* in ref. to current tax year:
- I add £8k to my SIPP before end of this tax yr
- SIPP platform will claim 20% tax (BR) on my behalf
- for the other 20% tax relief, would I need to inform HMRC? I ask this as haven't completed SA for the last few years (HMRC never asked me to) so assume need to inform HMRC somehow so they can apply the other 20% to my tax code?

*Aware my understanding of this topic and the tax relief part might be incorrect....work in progress!

I think you can forget about getting the tax benefit via your tax code given we are already in March.

There is a new online HMRC form you would need to complete which is intended for relief at source contributions like these would be.

When HMRC deal with this (early Summer?) they will review the tax you have paid in 2024-25 against the tax you should have paid.  If your basic rate band needs extending by £10k then that will save you £2k in tax.

The overall outcome will depend on other factors like the interest you receive but even if you end up with a tax bill it should be £2k less than it would be without the extra pension contribution.

There is no need for a Self Assessment return in this situation.

noclaf

Thanks DandA. I will consider my overall situation and whether worthwhile bunging in some into the SIPP (as set out above) as well as S&SISA and opening a PB account to better manage the tax situation ahead of 25-26 tax year.

Sarahspangles

Dazed_and_C0nfused said:

I think you can forget about getting the tax benefit via your tax code given we are already in March.

There is a new online HMRC form you would need to complete which is intended for relief at source contributions like these would be.

When HMRC deal with this (early Summer?) they will review the tax you have paid in 2024-25 against the tax you should have paid.  If your basic rate band needs extending by £10k then that will save you £2k in tax.

The overall outcome will depend on other factors like the interest you receive but even if you end up with a tax bill it should be £2k less than it would be without the extra pension contribution.

There is no need for a Self Assessment return in this situation.

I completed the online form recently, they say (when you hit submit) that this will be processed within 28 working days. That is 28, not a typo for 20.

Dazed_and_C0nfused

Sarahspangles said:

Dazed_and_C0nfused said:

I think you can forget about getting the tax benefit via your tax code given we are already in March.

There is a new online HMRC form you would need to complete which is intended for relief at source contributions like these would be.

When HMRC deal with this (early Summer?) they will review the tax you have paid in 2024-25 against the tax you should have paid.  If your basic rate band needs extending by £10k then that will save you £2k in tax.

The overall outcome will depend on other factors like the interest you receive but even if you end up with a tax bill it should be £2k less than it would be without the extra pension contribution.

There is no need for a Self Assessment return in this situation.

I completed the online form recently, they say (when you hit submit) that this will be processed within 28 working days. That is 28, not a typo for 20.

But that would be way too late for a change to be made by HMRC and then implemented by an employer for the current tax year.

Given the op hasn't yet made the pension contribution the deadline of 13 March is a little unrealistic.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11060

Sarahspangles

Dazed_and_C0nfused said:

Sarahspangles said:

Dazed_and_C0nfused said:

I think you can forget about getting the tax benefit via your tax code given we are already in March.

There is a new online HMRC form you would need to complete which is intended for relief at source contributions like these would be.

When HMRC deal with this (early Summer?) they will review the tax you have paid in 2024-25 against the tax you should have paid.  If your basic rate band needs extending by £10k then that will save you £2k in tax.

The overall outcome will depend on other factors like the interest you receive but even if you end up with a tax bill it should be £2k less than it would be without the extra pension contribution.

There is no need for a Self Assessment return in this situation.

I completed the online form recently, they say (when you hit submit) that this will be processed within 28 working days. That is 28, not a typo for 20.

But that would be way too late for a change to be made by HMRC and then implemented by an employer for the current tax year.

Given the op hasn't yet made the pension contribution the deadline of 13 March is a little unrealistic.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11060

Yes definitely, but it may be useful for other people seeing this thread. The new process claims it will complete far more quickly. We’ll see if that’s so. If they achieve 28 days, I’ll get my refund for the current tax year before the one I claimed for the previous year, where I supplied additional information 55 working days ago.