pension contributions and tax relief

whu

I pay into a GPP and know that I can claim back tax relief (currently 18%) on my gross pension contributions from HMRC (less any additional tax payable by me at the higher rate for benefits/interest etc).
I have been told that I can put in additional lump sums into the pension.
I was wondering the following:
1 If i put in a lump sum does my employer also have to put a contribution in?I assume not and that the employer just keeps putting in its monthly contribution but thought I would check.
2 Will I also get tax relief on any lump sum contribution?
3 When I am claimimg back for contributions made in 2007-8 do I still claim back 18% or is it now 20%.
Any advice would be much appreciated.

Debt_Free_Chick

whu wrote: »

1 If i put in a lump sum does my employer also have to put a contribution in?I assume not and that the employer just keeps putting in its monthly contribution but thought I would check.

Unless your employer has a policy to match any additional contributions you pay, then no - they only pay what they've promised to pay

2 Will I also get tax relief on any lump sum contribution?

Yes - I assume your total contributions are less than your total taxable earnings for the year

3 When I am claimimg back for contributions made in 2007-8 do I still claim back 18% or is it now 20%.
Any advice would be much appreciated.

You don't claim the additional tax relief. You put the grossed up contribution on your tax return and the taxman does the rest. So if you paid £80 this year, you gross it up to £100 and put that on your tax return. When the tax man does the calculation, he gives you 40% relief on that contribution i.e. £40 and then deducts the relief you had at source i.e. £20.

Just put the grossed up contribution on your tax return

whu

Thanks v much - I do not have to do a tax return so should I write to the tax man and tell him my gross contributions and the amount of interest I have earned and just ask for the tax relief of 20% on my contributions after this has bben worked out?

Debt_Free_Chick

whu wrote: »

Thanks v much - I do not have to do a tax return so should I write to the tax man and tell him my gross contributions and the amount of interest I have earned and just ask for the tax relief of 20% on my contributions after this has bben worked out?

Yes call the tax office. They used to have a specific form for this and they still might have one - but they'll confirm what you have to do.

No need to ask for the tax back - they'll do that when you complete the form. Usually, though, you get the tax back by an adjustment to this year's coding - so you pay less tax this year, to reflect the relief due on the contributions you paid last year. They will also make another adjustment to this year's tax code which assumes you continue to pay the same pension contributions, so you pay less tax this year, to reflect the tax relief due on pension contributions you pay this year.

HTH

whu

Thanks again for your help - one final thing:
I have been told that in order to calculate my gross contributions for the tax year to submit to the tax man I add up my contributions made through PAYE x 100 and divide by 78 (using this years figure) - would it be the same for a lump sum contribution (eg if i paid in £2000) ie £2000 x 100 divided by 78 =£2564
Thanks again.

Debt_Free_Chick

whu wrote: »

Thanks again for your help - one final thing:
I have been told that in order to calculate my gross contributions for the tax year to submit to the tax man I add up my contributions made through PAYE x 100 and divide by 78 (using this years figure) - would it be the same for a lump sum contribution (eg if i paid in £2000) ie £2000 x 100 divided by 78 =£2564
Thanks again.

Only for contributions paid last year.

For contributions paid this year you divide by 80 as the basic rate of tax is now 20% (not 22%, which it was last year).

whu

Thanks for the advice.

stan707

With regard to tax relief on AVC's I have read the following
"tax relief on the contributions is limited to the higher of 100% of relevant earnings or where tax relief is given at source, limited to £3,600".
If I contribute £4600 to an AVC (Clerical Medical) via my companys scheme(taxed at source??),what will happen to the £1000 overpayment?
Am I taxed on it?
Do I have to claim relief via self assessment?
Thanks in anticipation.Stan707

dunstonh

stan, you should start your own thread and not hijack someone elses with new questions unrelated to the topic.

However, yours is a simple answer. The £3600 figure is a threshold for non earners or those that earn less than £3600 a year. If you earn £20,000 then you can pay £20,000 into a pension and get tax relief. If you earn £200,000 then you can pay £200,000 into a pension and get tax relief. There is an upper limit per year to which you can get tax relief but its not something you would tend to worry about as you are looking at contributions in the hundreds of thousands of pounds then and you wouldnt be posting on a website if that was the case.

whu

Following on from my previous posts and the replies i was thinking that it would be a good idea to pay in a lump sum for the following reasons:
1 Tax back at 20% on lump sum contributions.
2 The money would probably buy more units in todays market so buy more now rather than spread it by increased monthly contributions over a period of time.
Would appreciate any comments on my thinking.