Tax relief on additional pension contribution

Samfau

Looking for some advice on reclaiming tax for a one-off additional contribution.

I made a one-off payment of £4k directly from my bank account to my workplace pension, hoping to benefit from tax relief (I'm a higher rate tax payer).

I was expecting this amount to be topped up automatically by my pension provider (Aviva) with basic rate tax relief, then for me to claim the higher rate tax relief from HMRC. But, nothing was added to my contribution when it reached my pension pot, still just £4k.

I used this form to claim tax relief from HMRC and explained the situation: https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

I then received a tax refund just shy of £1k from HMRC.

I think this covers the higher rate tax refund but not the basic rate top-up I should have received. I was expecting £5k (with top up) in my pension pot and a £1k refund.

HMRC told me to speak to Aviva, but Aviva say my pension pot is not eligible for automatic tax relief (post RDR 2013 policy - whatever that means) and needs to be done through self assessment.

Can anyone confirm this and suggest what I should do next?

Dazed_and_C0nfused

Samfau said:

Looking for some advice on reclaiming tax for a one-off additional contribution.

I made a one-off payment of £4k directly from my bank account to my workplace pension, hoping to benefit from tax relief (I'm a higher rate tax payer).

I was expecting this amount to be topped up automatically by my pension provider (Aviva) with basic rate tax relief, then for me to claim the higher rate tax relief from HMRC. But, nothing was added to my contribution when it reached my pension pot, still just £4k.

I used this form to claim tax relief from HMRC and explained the situation: https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

I then received a tax refund just shy of £1k from HMRC.

I think this covers the higher rate tax refund but not the basic rate top-up I should have received. I was expecting £5k (with top up) in my pension pot and a £1k refund.

HMRC told me to speak to Aviva, but Aviva say my pension pot is not eligible for automatic tax relief (post RDR 2013 policy - whatever that means) and needs to be done through self assessment.

Can anyone confirm this and suggest what I should do next?

How did you receive this refund?  Did you not get a calculation of some sort from HMRC?

Ignoring this pension contribution do you have any reason to need to file a Self Assessment return 🤔

Samfau

Yes, calculation received from HMRC then a payment direct to my bank account.

I've no need to file a self assessment otherwise.

After completing that online process I also received a "Bank and Building Society Interest (BBSI)" form from HMRC which I returned (I was below the £500 allowance).

Dazed_and_C0nfused

Samfau said:

Yes, calculation received from HMRC then a payment direct to my bank account.

I've no need to file a self assessment otherwise.

After completing that online process I also received a "Bank and Building Society Interest (BBSI)" form from HMRC which I returned (I was below the £500 allowance).

So surely that calculation shows how the tax relief has been applied?

Have you been given an additional allowance of some sort or has your basic rate been increased?

And whichever it is was it £4,000 or £5,000 HMRC used?

Samfau

When I spoke to HMRC they said they "grossed up" the £4k to £5k but I'm not entirely sure what this means.

On the calculation:

The "basic rate at 20% on..." is £5k higher than I would otherwise expect having not made the additional pension contribution and "higher rate at 40% on..." is roughly £5k lower. My personal allowance hasn't changed.

So it seems £5k of my income has effectively moved from higher rate tax to basic rate tax. But I was expecting to get a refund/top-up to account for both rates of tax.

If I contributed an equivalent amount via salary sacrifice I'd save £2k in tax - right?

DRS1

That sounds like they have treated it as a Relief at Source contribution.  So they have assumed you got the £1k claimed by the pension scheme when you didn't.  I think there have been stories on here of that happening to other people given that Relief at Source is pretty common and making a direct contribution where the pension scheme does not claim the basic rate is not at all usual.
You probably need to go back to HMRC and explain how the contribution was treated by the pension scheme.

Albermarle

DRS1 said:

That sounds like they have treated it as a Relief at Source contribution.  So they have assumed you got the £1k claimed by the pension scheme when you didn't.  I think there have been stories on here of that happening to other people given that Relief at Source is pretty common and making a direct contribution where the pension scheme does not claim the basic rate is not at all usual.
You probably need to go back to HMRC and explain how the contribution was treated by the pension scheme.

As above this issue crops up on the forum occasionally.
It is unusual for a scheme not to automatically add basic rate relief, so the HMRC system is not set up to deal with it and anybody you talk to there will probably not understand properly.
As far as I can remember from those previous threads, it took a lot of toing and froing with HMRC to sort it out and took over a year.

The lesson to learn is always check with your workplace pension provider in advance if they will add basic rate relief to one off payments.
The issue is that some workplace pensions are only set up to receive payments that are taken from salary before tax or via a salary sacrifice arrangement. In these cases no basic rate relief needs to be added.

Samfau

Thanks, that was my suspicion. Good to have it confirmed. The annoying thing is I did check with my pension provider and their helpful chat bot told me relief at source would be applied . This turned out not to be the case when I spoke to a real person about my specific pension (which i believe is indeed salary sacrifice).

I'm assuming then that the suggestion to complete a self assessment is not required? And I should just write to HMRC to explain the situation?

The contribution in question was made at the end of last financial year. Frustratingly I will have to go through the same process again as I made a second payment later on (I was hoping to get it in the same financial year but missed due to some delays processing it on my providers side). Perhaps for that one I will just write to HMRC from the outset rather than trying to use their online form, which as you say is not set up for this case.

DRS1

I was going to suggest speaking to them on the phone though I imagine that could be a long and frustrating call (not just the getting to speak to a human being part).  Writing may be the way to go but if you can I would include written evidence from the pension provider that it did not claim the 20% tax relief.  That could perhaps be a statement showing payments in to the scheme over a tax year or so (where the absence of a tax reclaim would be obvious) or maybe a written confirmation saying we did not claim the tax relief on this contribution.

I have never used the online form so I don't know if it accommodates the sort of contribution you made.  A self assessment form does.  I have some vague memory that someone on here has suggested the online form  does too.  I don't know.  Interesting that the Gov.uk page says something about providing evidence the scheme claimed 20% tax relief so maybe it can only be used in that particular circumstance.
Claim tax relief on your private pension payments - GOV.UK

Albermarle

If you speak to them, then best to phone at 08.00 sharp when the lines open.
Normally then you should get through within 10 mins or so.

Samfau

Thanks for suggestions. It did allow me to upload evidence for the online form, which I did, along with a covering note explaining that relief at source hadn't been applied but clearly it didn't work. My pension statement is a bit ambiguous as it says "additional contributions including any tax relief" then the exact amount of my additional contributions (i.e. including £0 tax relief). A written confirmation letter would certainly be clearer, so I'll be requesting that.

I'll give it a go over the phone then write if no luck. Thanks again.