Claiming back tax from pension lump sum contribution

capncallanish

I've a question about claiming tax relief on a income that I want to put into my pension. He's the scenario -

I've had a bonus payment from work. I knew it was coming, so I instructed payroll that I wanted to pay it directly into my pension as salary sacrifice, rather than take it after PAYE so that it wouldn't get taxed.

There's been some mix-up, so it's gone through as PAYE income and so I've had a load of tax skinned off it.

If I now put the net amount that I've been left with into my pension as a lump sum, is there a procedure to get back (as in, also have it paid into my pension) the amount that I've had taken as tax?

I think there's a HMRC process for claiming tax relief but I'm struggling to make full sense of it, and whether it requires me to fill in a tax return, which I'm currently not doing.

Thanks.

ColdIron

Your pension provider will automatically claim basic rate tax from HMRC

Do you pay higher rate tax?

Marcon

capncallanish said:

I've a question about claiming tax relief on a income that I want to put into my pension. He's the scenario -

I've had a bonus payment from work. I knew it was coming, so I instructed payroll that I wanted to pay it directly into my pension as salary sacrifice, rather than take it after PAYE so that it wouldn't get taxed.

There's been some mix-up, so it's gone through as PAYE income and so I've had a load of tax skinned off it.

If I now put the net amount that I've been left with into my pension as a lump sum, is there a procedure to get back (as in, also have it paid into my pension) the amount that I've had taken as tax?

I think there's a HMRC process for claiming tax relief but I'm struggling to make full sense of it, and whether it requires me to fill in a tax return, which I'm currently not doing.

Thanks.

Quite apart from tax, there's an NI consideration, too, which you won't be able to 'reclaim'.

Before doing anything else, if the mix-up is entirely down to the employer (ie you need to be utterly blameless!), ask them if the can resolve matters so you end up in the position you asked to be in. 

If the payment related to month 1 of the current tax year it'll be a lot simpler than if it relates to month 12 of last year - but that's for them to sort out.

Albermarle

Just as a caveat to the above.
You need to check with your workplace pension provider that they accept payments direct from employees, and that they will add the basic tax relief .
Normally they should, but as they normally only get employer contributions, there is a possibility they can not process personal contributions .

capncallanish

Thanks for the comments. Yes, I'm a higher rate tax payer. So if I paid in the lump sum to my pension provider now (and I'll check that I can - I hadn't considered that), then the pension provider will claim basic rate tax relief on that amount themselves, so I would just need to claim the difference between basic rate and my higher rate tax amount, correct?

Yes, I'm aware that the NI amount isn't reclaimable, so it's just the income tax amount I'd be looking at.

As suggested, I'm also chasing this up with payroll but as it's a massive organisation I'm dealing with, I suspect I might not get anywhere, which is why I'm exploring what my options are in that's the case. Thanks.

ColdIron

capncallanish said:

Thanks for the comments. Yes, I'm a higher rate tax payer. So if I paid in the lump sum to my pension provider now (and I'll check that I can - I hadn't considered that), then the pension provider will claim basic rate tax relief on that amount themselves, so I would just need to claim the difference between basic rate and my higher rate tax amount, correct?

Yes. You can do this via Self Assessment if you currently file one or use the online service

https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

YellowCarBlueCar

I've missed the bonus sacrifice window where I work in the past (we have to decide a few months ahead of payment if we wish to sacrifice some or all of our bonus to pension), so have increased my monthly salary sacrifice over a few months to get the bonus amount back into my pension.

If your salary sacrifice arrangement is flexible enough you will get some NI benefit this way, and the tax is sorted as per normal salary sacrifice arrangements.