Help with some DB/SIPP/HMRC pension maths, please

FloraandFauna

Hi, all,

could anyone help me out with the sort of sums I need to do to talk to HMRC?

I have a civil service pension I'm paying into, at 2.32%, and I also have a Vanguard SIPP which I pay into as and when and get 20% tax relief automatically claimed by Vanguard.

This year I realised that, as a Scottish taxpayer, I may not be getting the right tax bands applied to SIPP tax relief, and that in the last 2 of these 4 years, I have just tipped over into the higher rate Scottish tax band.

So I wrote to HMRC in January with my SIPP contributions, stating I was a Scottish taxpayer, with these figures:

2020-21, gross SIPP contribution £4,062.50, taxable salary £35,524.12
2021-22, gross SIPP contribution £1,250.00, taxable salary £41,080.08
2022-24, gross SIPP contribution £14,937.50, taxable salary £44,220.12
2024-25, gross SIPP contribution £3,337.50, taxable salary £49,839.46

I've just had messages back from HMRC saying there's nothing wrong with the first two years, that they owe me £94.25 for 2023-24 (as they say I only had tax relief on £6,000 of contributions, not £14,937.50 - and I do not understand why tax relief on the remaining £8,937.50 would only be £94.25), and that I owe them £491.61 for 2024-25 (as they gave tax relief on £6,000 of contributions but I only paid £3,337.50).

So now I don't know where to start. What is the £6,000 figure and where did they get it from? My SIPP has had a straight 20% applied to each contribution as it happened, so there is no record of £6,000 being applied anywhere for either year.

What sort of sums do I need to do to work out what the position should be, and how I account for the DB pension in the sums (or not)? Grateful for any help as I was not expecting that reporting additional pension contributions would result in my owing them money.

Dazed_and_C0nfused

First question is why aren't you bothered about the intermediate rate relief for years 2020-21 and 2021-22?

It's only an extra 1% but given you are posting on MSE you are presumably keen to save as much as possible 😉.

Were you Scottish resident in all those years?

Do you have untaxed interest they could be a factor?

Had you applied for or been in receipt of Marriage Allowance in any of those years?

What tax code was used in 2024-25?  Your P60 will show the one used at the end of the tax year.

Have you ever previously notified HMRC that you were making RAS contributions (the Vanguard SIPP)?

Marcon

FloraandFauna said:

Hi, all,

could anyone help me out with the sort of sums I need to do to talk to HMRC?

I have a civil service pension I'm paying into, at 2.32%, and I also have a Vanguard SIPP which I pay into as and when and get 20% tax relief automatically claimed by Vanguard.

This year I realised that, as a Scottish taxpayer, I may not be getting the right tax bands applied to SIPP tax relief, and that in the last 2 of these 4 years, I have just tipped over into the higher rate Scottish tax band.

So I wrote to HMRC in January with my SIPP contributions, stating I was a Scottish taxpayer, with these figures:

2020-21, gross SIPP contribution £4,062.50, taxable salary £35,524.12
2021-22, gross SIPP contribution £1,250.00, taxable salary £41,080.08
2022-24, gross SIPP contribution £14,937.50, taxable salary £44,220.12
2024-25, gross SIPP contribution £3,337.50, taxable salary £49,839.46

I've just had messages back from HMRC saying there's nothing wrong with the first two years, that they owe me £94.25 for 2023-24 (as they say I only had tax relief on £6,000 of contributions, not £14,937.50 - and I do not understand why tax relief on the remaining £8,937.50 would only be £94.25), and that I owe them £491.61 for 2024-25 (as they gave tax relief on £6,000 of contributions but I only paid £3,337.50).

So now I don't know where to start. What is the £6,000 figure and where did they get it from? My SIPP has had a straight 20% applied to each contribution as it happened, so there is no record of £6,000 being applied anywhere for either year.

What sort of sums do I need to do to work out what the position should be, and how I account for the DB pension in the sums (or not)? Grateful for any help as I was not expecting that reporting additional pension contributions would result in my owing them money.

This year? You were asking a similar question back in 2020: https://forums.moneysavingexpert.com/discussion/6222159/confused-tax-band-21-process/p1

What actions did you take as a result of the (very helpful) answers you received when you asked about this nearly five years ago...?

Dazed_and_C0nfused

Looking at your history you do appear to have originally contacted HMRC about this 5 years ago so that might account for no change being needed for the first two tax years?

FloraandFauna

Dazed_and_C0nfused said:

First question is why aren't you bothered about the intermediate rate relief for years 2020-21 and 2021-22?
- I am! Which is why I reported those years to HMRC - their response is that there's nothing to see here, so I'm wondering if when they look again at it, they do some sum with the 19% and 21% rate I don't know about, which is why they said 'no change'.

It's only an extra 1% but given you are posting on MSE you are presumably keen to save as much as possible 😉.

Were you Scottish resident in all those years?
- yes, since 2018.

Do you have untaxed interest they could be a factor?
- no (unfortunately)

Had you applied for or been in receipt of Marriage Allowance in any of those years?
- no

What tax code was used in 2024-25?  Your P60 will show the one used at the end of the tax year.
- S1285L

Have you ever previously notified HMRC that you were making RAS contributions (the Vanguard SIPP)?
- about 5 or 6 years ago, when I first started - I phoned them and they gave tax relief of about another £53'ish - but that would only have been on about £1-2,000 contributions, so at no point would I have given them an expectation I would be contributing £6,000 every year.

Thank you! Answers in above - are there any other elements I may have overlooked?

Dazed_and_C0nfused

The tax deducted as shown on your P60 for each year is quite important.

Do you remember ever receiving a tax calculation or refund for the first two years? 

FloraandFauna

That is a superb question! I have just checked back on the P60s, and the tax codes for those first two years have been adjusted! 

2020-21, S1304L, tax paid £4,572.11 on £35,524.12
2021-22, S1316L, tax paid £5,712.87 on £41,080.08
2022-23, S1285L, tax paid £6,486.81 on £44,220.12
2023-24, S1285L, tax paid £8,849.48 on £49,839.46

I cannot interpret those figures though. Does that look as though the first two years were adjusted for 21%? Or for a pretend £6k contribution?

The latter two are slightly higher than the £12,570, but how do I work out if that accounts for this £6k they've invented, and if it does, why did they invent it, and if it does and they invented it for a good reason, I still don't understand why they say I've been overcompensated for a total of £12k over two years, when I've actually contributed over £18k over those two years? 

Dazed_and_C0nfused

FloraandFauna said:

That is a superb question! I have just checked back on the P60s, and the tax codes for those first two years have been adjusted! 

2020-21, S1304L, tax paid £4,572.11 on £35,524.12
2021-22, S1316L, tax paid £5,712.87 on £41,080.08
2022-23, S1285L, tax paid £6,486.81 on £44,220.12
2023-24, S1285L, tax paid £8,849.48 on £49,839.46

I cannot interpret those figures though. Does that look as though the first two years were adjusted for 21%? Or for a pretend £6k contribution?

The latter two are slightly higher than the £12,570, but how do I work out if that accounts for this £6k they've invented, and if it does, why did they invent it, and if it does and they invented it for a good reason, I still don't understand why they say I've been overcompensated for a total of £12k over two years, when I've actually contributed over £18k over those two years? 

Will need to reply on more detail later but is it possible you have claimed WFH allowance for some or all of those years?

Or any other type of job related expenses?

What happened over two tax years is of no relevance either, each tax year is looked at separately, you cannot combine two years together.

FloraandFauna

No, no WFH expenses/allowances/anything, nor job related expenses (civil service, so I don't claim expenses for anything).

Thanks for the confirmation about the combining - but now it makes even less sense if they're not compensating for one year, in another.

FloraandFauna

sorry this is a huge picture! But this is what the GovGateway says about 2023-24, and then 2022-23. Saying I owe them £491.61 because they thought I had contributed £6k (why!?) - so would that £6k they made up be reflected in the tax code S1285L? 

And would the tax code S1285L for 2022-23 also reflect their expectation (why!?) that I would be contributing £6k that year - but in that case, why do they only think I'm due £94.25 tax relief for the remaining £8,937 contributions?

Sorry if I'm not helping to clarify things - I really appreciate your help! I just do not understand why they are calculating this as they are.

Dazed_and_C0nfused

You should be entitled to any additional relief due based on the amount of your contribution in each tax year.

You cannot combine years or move contributions from one year to another.  If you have received too much relief via your tax code for one year then you will owe tax for that year.

Could you provide the correct info though, just realised you are missing a tax year and the third entry makes no sense.  Is it 22-23 or 23-24 🤔

2020-21, gross SIPP contribution £4,062.50

2021-22, gross SIPP contribution £1,250.00

2022-24, gross SIPP contribution £14,937.50

2024-25, gross SIPP contribution £3,337.50