Make the taxman work for you for a change

Gambler

Apologies for double posting but I tried the 'cutting tax' board the other day and have had no responses.


Just seen an advertisement in today's Times by Scottish Widows with the above entitled headline.

Says if you earn over £40,000, paying £60 into a pension means you can get an extra £40 from the taxman.

I actually have a pension with SW where I pay in 7% and my employer matches it. When deducted from my salary 22% tax relief is deducted from the 7% payment.

My basic salary is under £40K but for the past 3 years I have gone into the upper tax bracket due to overtime.

I don't currently fill in a tax form, is this where i would need to reclaim the difference? And also can I claim for the past 3 years?

I just assumed that my tax and pension was all handled by my employer with my salary evry month.

Any help appreciated.

jamesd

Write to your local tax office and tell them the total amount of your own personal pension contributions for each year, saying if the number given is before or after tax relief. Don't include the company part.

You're entitled to 40% back in total on the portion of the amount that was from salary in the higher rate tax bracket and paid by you. 22% was claimed automatically by the pension fund leaving 18% to claim, at most.

royeee

jamesd wrote: »

Write to your local tax office and tell them the total amount of your own personal pension contributions for each year, saying if the number given is before or after tax relief. Don't include the company part.

You're entitled to 40% back in total on the portion of the amount that was from salary in the higher rate tax bracket and paid by you. 22% was claimed automatically by the pension fund leaving 18% to claim, at most.

If paying into a company pension scheme through salary then the pension contribution is taken off before tax deduction in which if paying higher rate tax the 40% saving comes into play. Or are you saying that even then you still need exercise a claim?

jem16

Gambler wrote: »

I just assumed that my tax and pension was all handled by my employer with my salary evry month.

Any help appreciated.

Is your pension paid from your gross salary or your net salary?

If gross then you have the full relief at source as the pension contribution is taken before you are taxed.

If net then you can get the extra relief from your tax return. However this is only paid on the part above the 40% bracket. So if you earned £100 into the higher rate tax bracket you would be entitled to claim 18% of that £100.

If paying into a company pension scheme through salary then the pension contribution is taken off before tax deduction in which if paying higher rate tax the 40% saving comes into play. Or are you saying that even then you still need exercise a claim?

No you have the full relief at source.

royeee

Hmm, this has got me thinking. At the moment I am in employment, paying AVC and in the higher (40%) rate. The AVC is taken off at source before tax deducted.

I also draw my previous company pension in which I pay tax at the standard rate so should these two taxable income be added up so that I get further tax relief?

jem16

You should add up all your taxable income - i.e. salary (after pension contributions), pension, savings interest, dividend payments. Then take off whatever your personal allowance is.

If the total is more than £34,600 then you can claim the extra relief on that amount over it.

jamesd

royeee, what you say is correct for some employer pension schemes, notably most that happen to be the final salary type.

It's not the way work-sponsored personal pensions can be expected to be run, those are more likely to be after tax employee contributions and pre-tax employer sent to the pension company. In that case tax reclaiming is required for the higher rate part unless it's being done via salary sacrifice.

royeee

jem16 wrote: »

You should add up all your taxable income - i.e. salary (after pension contributions), pension, savings interest, dividend payments. Then take off whatever your personal allowance is.

If the total is more than £34,600 then you can claim the extra relief on that amount over it.

I phoned up HMRC about not getting the relief in full through not accounting for other incomes not taken through salary. I have been advised to submit to them my total AVC contributions (company pension is non-contributory) for the last 7 tax years asap and they will reassess and give me refund. Just as well I came into this forum and this is a kind of 'winner'.

royeee

Misunderstanding here. HMRC reminded me that my voluntary contributions are deducted (from salary) prior to tax deduction therefore I received my tax relief at source as my taxable income and the tax deducted are reduced.