Pension Salary Sacrifice and Higher Tax rate

LegoHead

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

Marcon

LegoHead said:

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

If all your pension contributions have been made by salary sacrifice (not clear from your question), there's no further tax relief available. You've not received the salary you sacrificed, so haven't paid any tax on it, never mind  paying at higher rate tax. The gross amount will have been paid by your employer straight to your pension, together with the employer contribution.

LegoHead

Marcon said:

LegoHead said:

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

If all your pension contributions have been made by salary sacrifice (not clear from your question), there's no further tax relief available. You've not received the salary you sacrificed, so haven't paid any tax on it, never mind  paying at higher rate tax. The gross amount will have been paid by your employer straight to your pension.

How to Higher and Additional Rate Pension Tax Relief 

this is the info that got me thinking about all of this. I believe there is additional tax relief due as I am technically in the higher band?

Also found this calculator

Pension tax relief calculator | Hargreaves Lansdown

looks like I may be owed around £1500 for a typical year on my current total compensation.

Dazed_and_C0nfused

LegoHead said:

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

You have completely misunderstood this.  There is absolutely nothing you can claim from HMRC as you do not get any pension tax relief with salary sacrifice.

You are agreeing to a reduced salary in return for additional employer contributions and there is no tax relief available to you on employer contributions.

You do of course avoid paying both tax and NI on the salary you are no longer getting.

Dazed_and_C0nfused

LegoHead said:

Marcon said:

LegoHead said:

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

If all your pension contributions have been made by salary sacrifice (not clear from your question), there's no further tax relief available. You've not received the salary you sacrificed, so haven't paid any tax on it, never mind  paying at higher rate tax. The gross amount will have been paid by your employer straight to your pension.

How to Higher and Additional Rate Pension Tax Relief 

this is the info that got me thinking about all of this. I believe there is additional tax relief due as I am technically in the higher band?

You haven't paid anything into a pension though.

Marcon

LegoHead said:

Marcon said:

LegoHead said:

Work in England for tax reasons.
Over last couple of years I have been above the higher rate threshold and so salary sacrificed myself to be lower. I did not realise until this week that I should have been talking to HMRC to get the higher rate tax benefits too.

One year I was on £53k + 4% pension+  £4k bonus = £59,120 total compensation
This year I am on £52.5k + 10% pension + £5k bonus = £62,750 total compensation

The pension percentage is in addition to the salary so I have been way over the threshold. I assumed just doing the salary sacrifice automatically got me the full tax benefits.
Apologies if this is posted elsewhere. But can anyone point me in the right direction to calculating what I may get back, how to inform HMRC and how many years can I go back?

Does the refund have to go into my pension? If not I want to take the cash and put into my savings.

If all your pension contributions have been made by salary sacrifice (not clear from your question), there's no further tax relief available. You've not received the salary you sacrificed, so haven't paid any tax on it, never mind  paying at higher rate tax. The gross amount will have been paid by your employer straight to your pension.

How to Higher and Additional Rate Pension Tax Relief 

this is the info that got me thinking about all of this. I believe there is additional tax relief due as I am technically in the higher band?

Also found this calculator

Pension tax relief calculator | Hargreaves Lansdown

looks like I may be owed around £1500 for a typical year on my current total compensation.

But have you actually made any personal contributions, deducted direct from your salary or otherwise paid by you? Salary sacrifice is NOT a personal contribution (at least not in the eyes of HMRC!).

El_Torro

This year for example your total compensation is not £62,750. It's £52.5k minus 10% (minus, not plus, as you have agreed to a lower salary in exchange for more pension contributions from your employer) plus £5k bonus. So £52,250. 

As others have mentioned you don't need to claim anything back from HMRC as PAYE should have handled it all for you, including taking into account the salary sacrifice.

The important thing to remember is that salary sacrifice is a much better way to pay into a pension than making the contributions yourself. If you make the contributions yourself you can still claim Income Tax relief but you don't get the benefit of paying less National Insurance.

Cobbler_tone

The most useful way to understand this is to look at your last payslip of the tax year and view 'taxable pay'.

This will take into account all of your salary, your bonus, any other taxable benefits/sacrifices and the amount you have been taxed on across the year. If you want to avoid 40% tax this is the number you need to get below the threshold, which can normally be achieved by juggling your pension contribution.
The challenge I have with mine is that my bonus is only known two weeks before the the end of the tax year and paid on the 31st March. The bonus can be anything from £0 - £9k and very difficult to have an exact idea of what it'll be (a national scheme), so a bit of a finger in the air....and they won't bonus sacrifice.

prowla

As per others, you don't pay tax (and NI) on salary sacrifice, therefore there's nothing to reclaim.

ie.

• One year I was on £53k + £4k bonus = £57k
• This year I am on £52.5k + £5k bonus = £57.5k

Salary sacrifice is a tax avoidance scheme.

(Actually the resultant income when you draw the pension is taxable.)

Albermarle

prowla said:

As per others, you don't pay tax (and NI) on salary sacrifice, therefore there's nothing to reclaim.

ie.

• One year I was on £53k + £4k bonus = £57k
• This year I am on £52.5k + £5k bonus = £57.5k

Salary sacrifice is a tax avoidance scheme.

(Actually the resultant income when you draw the pension is taxable.)

There is no difference in the pension tax relief you gain when your employer uses a salary sacrifice scheme for pension contributions, compared to the other two methods ( Relief at source and Net pay) .
What you do gain is paying less NI. 

Marcon

Cobbler_tone said:

The most useful way to understand this is to look at your last payslip of the tax year and view 'taxable pay'.

This will take into account all of your salary, your bonus, any other taxable benefits/sacrifices and the amount you have been taxed on across the year. If you want to avoid 40% tax this is the number you need to get below the threshold, which can normally be achieved by juggling your pension contribution.
The challenge I have with mine is that my bonus is only known two weeks before the the end of the tax year and paid on the 31st March. The bonus can be anything from £0 - £9k and very difficult to have an exact idea of what it'll be (a national scheme), so a bit of a finger in the air....and they won't bonus sacrifice.

By the time you have your last payslip of the tax year, it's definitely too late to do anything via your employer/salary - so only useful as an aid to planning in the next tax year, but of course the numbers may well change...

OP, you're too late to add any more pension contributions for the tax year 2024/25; you can only ever get tax relief in the year the pension contribution is actually made. Don't forget that if you give to charity using Gift Aid and make the payment in this tax year (2025/26), you can ask HMRC to treat it as being paid in 2024/25 and benefit from higher rate tax relief that way. That's especially useful if you will be a basic rate taxpayer in 2025/26.