Do tax codes go negative between £100,000 and £125,000?

Albermarle

TaxIsVeryTaxing said:

Albermarle said:

TaxIsVeryTaxing said:

molerat said:

Unfortunately my employer are being very unhelpful and won't allow me to make a final pension AVC from my pretax pay. Instead I must make the AVC from my post-tax pay and then claim the tax back myself.

If that is a net pay scheme then you may be opening yourself up to a whole load of misery trying to claim the tax back,  there are several threads on the subject.

That's rather worrying. The scheme is a "salary sacrifice" scheme, which I've just googled and appears to be synonymous with "net pay". Are you able to provide any more details on what problems people have encountered?

There are three ways that pension contributions can be made.

Salary sacrifice - Your actual salary is reduced and the employer makes equivalent contributions to your pension ( along with their own contribution)- You get tax relief automatically by not paying any tax on the sacrificed amount in the first place. You also save on NI .
Net pay - The contributions are taken out of your salary before tax is applied, so again you get the tax relief 'automatically' . The employers contributions are made to your pension separately.
Relief at source - Your contributions come out of your taxed salary/take home pay. The pension provider adds basic rate tax relief to your contributions. If you are a higher rate taxpayer you need to claim the extra relief from HMRC.

Employers can use either of the three systems. If you make a personal payment it is always relief at source.

The problem alluded to in a previous post, is that if your employer uses salsac or net pay, and then you make a personal contribution, the workplace provider/pension may not be set up to add the basic rate tax relief. Then there can be a long hassle with HMRC to get it sorted out.

SO - check with the pension provider in advance that if you make a personal contribution, that they will add basic rate tax relief ( I think most will, but some do not) . If they will not, then the solution is to open a new personal pension/SIPP yourself and add to that instead. 

Thank you for taking the time to provide this summary. It is most helpful. In fact, this is starting to ring alarm bells for me now. I have previously spoken to my company's pension provider and they have already stated that "You will not receive any tax relief either via the payroll or from the pension provider, so you will need to
contact HMRC to reclaim any tax relief." - this sounds very much like the situation you have described.

Luckily it is very easy set up a new personal pension yourself.

monkey-fingers

Yup. Open up a SIPP and dump the money in it and claim the tax back.

There aren't many that can be instantly setup online. I was pointed at interactive investor and Hargreaves Lansdown as suggestions for ones that can, but I'm not getting into any trouble about suggesting one over another, or indeed any others.

Albermarle

monkey-fingers said:

Yup. Open up a SIPP and dump the money in it and claim the tax back.

There aren't many that can be instantly setup online. I was pointed at interactive investor and Hargreaves Lansdown as suggestions for ones that can, but I'm not getting into any trouble about suggesting one over another, or indeed any others.

OP- To maybe expand on  the comment in bold.
If you make a personal contribution to a SIPP or personal pension, the provider will automatically add basic rate tax relief to it ( for example if you add £800 they add 25% to make it £1000). They reclaim the money from HMRC, you do not have to do anything. It takes a few weeks for the relief to come through, but some providers will prefund it and add it on straightaway.
If you want to claim some higher rate relief, because you have paid some 40% tax, you have to contact HMRC, who will refund you the extra directly ( to you, not to your pension) .

Separately there is a limit on how much you can add to a pension each tax year, but there is a possibility for unused allowance from previous years, but you might be also constrained by your current earnings. Perhaps leave that detail until you have a new pension set up, assuming that is the final outcome.
For SIPPs you could have a look at the two mentioned in the previous post + Fidelity and  AJ Bell; 
For personal pensions you could look at Vanguard or Standard Life or Aviva .
SIPPs offer a full range of thousands of investments, shares etc. whilst personal pensions offer a smaller in house range of investments.

TaxIsVeryTaxing

Albermarle said:

monkey-fingers said:

Yup. Open up a SIPP and dump the money in it and claim the tax back.

There aren't many that can be instantly setup online. I was pointed at interactive investor and Hargreaves Lansdown as suggestions for ones that can, but I'm not getting into any trouble about suggesting one over another, or indeed any others.

OP- To maybe expand on  the comment in bold.
If you make a personal contribution to a SIPP or personal pension, the provider will automatically add basic rate tax relief to it ( for example if you add £800 they add 25% to make it £1000). They reclaim the money from HMRC, you do not have to do anything. It takes a few weeks for the relief to come through, but some providers will prefund it and add it on straightaway.
If you want to claim some higher rate relief, because you have paid some 40% tax, you have to contact HMRC, who will refund you the extra directly ( to you, not to your pension) .

Separately there is a limit on how much you can add to a pension each tax year, but there is a possibility for unused allowance from previous years, but you might be also constrained by your current earnings. Perhaps leave that detail until you have a new pension set up, assuming that is the final outcome.
For SIPPs you could have a look at the two mentioned in the previous post + Fidelity and  AJ Bell; 
For personal pensions you could look at Vanguard or Standard Life or Aviva .
SIPPs offer a full range of thousands of investments, shares etc. whilst personal pensions offer a smaller in house range of investments.

Thank you. This is all very helpful information for me. I've learnt a lot since asking what I thought was a simple question.