Claiming 40% relief on pension contributions

talexuser

I'm on self assessment because of dividends, retired with a SIPP funded at the max of £3600 a year for unearned income. In the past the 3600 has always been added to my personal allowance for PAYE on my pension. This year the SIPP allowance has been decreased to 3462.

After some head scratching I worked out
personal allowance 12570
state pension 11963
allowance left 607

20% band 37700
band plus 607 = 38307

private pension 38445
therefore amount in the 40% band = 138

SIPP relief 3600 - 138 = 3462 allowance in the 20% band

Is 40% relief supposed to be paid on the £138 SIPP contribution in the higher rate band?

Now I read
"higher and additional rate taxpayers must claim the extra 20% or 25% relief themselves – either via a tax return or directly with HMRC. Failing to do so means missing out on a healthy chunk of cash."

How am I supposed to claim this please - I can't remember any special area of the self assessment form?

kimwp

You mention dividends, have you added those to calculate your net adjusted income? Do you have any interest from savings?

What is the letter in your tax code?

DRS1

How am I supposed to claim this please - I can't remember any special area of the self assessment form?

Box 1 in the Section on Tax Reliefs on page TR4 of the tax return. Headed Paying into Registered Pension Schemes.

talexuser

https://forums.moneysavingexpert.com/discussion/comment/81879024#Comment_81879024

Does that mean if I enter 3600 as the gross or 2880 as the actual payment then the correct tax will be worked out?

talexuser

https://forums.moneysavingexpert.com/discussion/comment/81879024#Comment_81879024

https://forums.moneysavingexpert.com/discussion/comment/81878831#Comment_81878831

Yes, dividends and savings interest take me into the 40%, and I have a spreadsheet that works out the bands and tax rates and that has agreed with HMRC figures within a pound or so each year in the past. But this is the first time fiscal drag has reduced the SIPP tax relief on my 20% band tax code, and I just need clarity on this advice that you have to inform HMRC of the relief for the 40% band. If I just fill in the self assessment as normal is that enough? Tax code is an L.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81879119#Comment_81879119

You are conflating two different things.

Your tax code is simply a provisional attempt to collect some tax during the year.

Your tax return finalises things and that is where you get the correct amount of any additional pension relief due.

When it comes to completing the return you just have to follow the guidance provided and enter whatever is the appropriate figure. The Self Assessment calculation will then increase your basic rate band accordingly.

Do you think you might have previously submitted incorrect returns?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81879119#Comment_81879119

What goes in box 1 is the gross contribution including the tax relief the pension scheme claims (so 3600). If you are making regular contributions at that level you leave box 1.1 blank and then I believe HMRC use that figure for working out your tax code (for next tax year).

When you do self assessment online there is a calculation page which will work out the tax due for the year. It will include an allowance for any tax deducted under PAYE (obviously you have to include those figures in the return). So if too much or too little tax has been deducted then it will correct that but that will be part of an overall calculation which will include things like dividends and savings interest which may not have been covered by your tax code and won't have had tax deducted at source.

talexuser

Thanks, so I just keep declaring 3600 gross in self assesment as in previous years, and the fact that the tax code allowance figure of 3600 went down is just a function of fiscal drag in working out the allowance as previously theorised above.

Its just the advice I read quoted above made it seem more complicated tha just filling out the return.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81880631#Comment_81880631

Some people don't bother with a tax code adjustment, they just get the actual relief via their Self Assessment return.

OscarJack15

Sorry to jump on this this thread but thought might be better than a thresh one.

I'm a higher rate tax payer and complete self assessment. I used to own rental properties (hence SA) but have now sold, but the proceeds mean I will earn £000s in interest until such point I can shift all savings into ISA's. For this reason I continue to SA as I can control interest declarations on multi year fixed rate savings.

In order to bring my tax below the higher rate banding, I sacrifice a large portion of my salary into my pension. I normally contribute 6 % (my employer standard matching amount) each month through salary sacrifice, but then increase this dramatically in September each year, sacrificing the maximum can to keep me above the minimum wage threshold for Sep-March. (My employer tell tells me I can not sacrifice more in these months - I assume this is correct?

Unfortunately, due to underestimating interest received 2025/26, (mainly due the whole amount of 2 year Fix maturing and no interest declared on this in 2024/25) I will now go over the 40% threshold (and I cant increase my salary sacrifice amounts in Feb/March.

To avoid this, I wanted to pay an amount directly into my pension. I can see if I add (for example £1,000 to my pension, my provider (Std Life) gross up by £250, so it becomes £1,250. So, as a higher rate payer, do I add £1,250 to my SA? Or is a higher value to get the 40% relief?

I'm calculating my adjusted income (before the direct AVC) will be £51,750. How much would I need to pay into my pension ( and what would I enter on my SA) to bring me under £50,270 threshold

Many Thanks

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81891245#Comment_81891245

Best to create your own thread, particularly if it's regarding specifics of your circumstances.