Pension tax relief at the higher rate

Ray_Arman

Firstly you have to compute how much of your salary is over the basic rate tax threshold. In your case, your higher rate tax pay is £2,500. You may therefore make pension contributions of this amount to bring down your higher rate tax to the basic rate level. As the government contributes 20% towards your premiums, you will have to pay £2,000 (£166.67 per month) over to your AVC policy.

Ray_Arman

You can claim this through your tax return. Where it asks for your personal pension contribution amount,you will have to note the 'gross' amount which is the amount you paid in personally plus the 20% contibuted by the government. For e.g. if you paid £80 p.m then the gross amount per month is £100 (=£80/0.8). Annually this is £1,200.

If you are a higher rate taxpayer, then on completion of your tax return you will get an additional 20% relief. This will be computed by HMRC for you or by your advisor.

marklv

My situation is diabolically complicated. Firstly, I am paid 4 weekly instead of monthly, then my salary is structured very weirdly, in that my yearly gross salary includes a non-pensionable London allowance of £2,619 and then a deduction of the lower earnings limit is made from my £48,000 base (excluding London allowance) salary, making my pensionable salary £43,305. Of this amount I contribute 5% to the employer's final salary scheme and a further 5% as an AVC. My tax code is 467L.

Now, my last payslip (4 weekly pay period, not monthly) states that income tax paid is £678.22. Is this correct, given the above issues regarding higher rate taxpayers? My payroll department is unable to discuss in detail.

bogeysmum

I would suggest you go directly to your local tax office and discuss your situation with them. If they are ultimately deciding how much tax you need to pay, you would hope that they know how it is calculated!

marklv

I've now discussed it with the correct payroll people and they have confirmed that all deductions are made gross, so higher rate tax rebate is done automatically. I'm puzzled that the lawyer is having difficulties with his PAYE - unless the pension is not actually employer provided but the employer pays a given amount into it. Small firms/companies often prefer to have this arrangement, to save them the need to run pensions schemes themselves.

rosse17

Phone HMRC - Self Assessment Helpline - 0845 9000 444
Have your NI number to hand and as many payslips as you can muster from the relevant tax years.

They will now do the calculation for you over the phone, including for previous years provided you can tell them how much your monthly pension contribution is/was (if it has changed over the years).

They will then change your tax code for this year to incorporate the relief and send you a cheque for any repayment due for previous years.

If you have got a lot to reclaim they might ask you to write in but they will tell you what they need to know and where to write to.

wonderman

you are responding to a post that is almost exactly 2 years old

financial_warrior

"Almost exactly"... LOL. Which one is it?

Leslie_from_Pinner

There's a sting in the tail for GPPs compared to ordinary company pension plans. Although you can claim higher-rate tax back, you may well have wanted all the money to be invested in the pension fund. Even if you reinvest the higher-rate tax relief when it is returned to you, there is a significant time-lag. Contrast this with a "net pay" defined contribution plan where the entire gross contribution is decuted from pay and immediately invested in the pension.

dunstonh

Leslie_from_Pinner wrote: »

There's a sting in the tail for GPPs compared to ordinary company pension plans. Although you can claim higher-rate tax back, you may well have wanted all the money to be invested in the pension fund. Even if you reinvest the higher-rate tax relief when it is returned to you, there is a significant time-lag. Contrast this with a "net pay" defined contribution plan where the entire gross contribution is decuted from pay and immediately invested in the pension.

Not necessarily. A regular contribution to a GPPP qualifying for higher rate tax can be shown in your tax code. You dont have to wait until the tax return to declare it.