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Tax Code Query - personal pension payments
fluffig
Posts: 448 Forumite
in Cutting tax
If this tax year someone (40% tax payer, income c.£95k) is paying £2,500 by salary deduction as their employee contribution into employer's pension scheme, and £14,400 employee contribution into their own SIPP, so a total of £16,900 net, what should the personal pension payments line (under additions to your personal allowance) be on their tax coding?
20% is already being credited back each month both into employee's pension scheme account, and into their SIPP.
HMRC had £1,563, but couldn't explain why.
HMRC then said it should be £3,380 (= the other 20% tax relief due on the £16,900 total employee contributions).
HMRC have however instead changed it to £8,450 which is 50% of total employee contributions ...
Interested in what the figure actually should be!
20% is already being credited back each month both into employee's pension scheme account, and into their SIPP.
HMRC had £1,563, but couldn't explain why.
HMRC then said it should be £3,380 (= the other 20% tax relief due on the £16,900 total employee contributions).
HMRC have however instead changed it to £8,450 which is 50% of total employee contributions ...
Interested in what the figure actually should be!
0
Comments
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I will ignore the £2500 on the assumption that is is be salary sacrifice into a company scheme (perhaps it isn't?)
The £14400 net becomes £18000 after basic rate tax relief is added. You are due an additional £3600 in tax relief which, as a 40% taxpayer, should equate to an increase in your tax free allowances of £9000. (£9000 at 40% is £3600.)0 -
I still don't understand, sorry.
The employer provided scheme is an auto enrolment Standard Life Group Flexible Retirement Plan. Each month it shows the employee's contribution and then that as a grossed up rate with 20% included. In the SIPP each month an additional 20% tax re employee contibution shows.
So, if employee's total contributions are £16,900 (£2,500 into auto enrolment scheme, plus £14,400 into their own SIPP) what should the amount against the personal pension payments line (under additions to your personal allowance) on the tax coding be?0 -
I still don't understand, sorry.
The employer provided scheme is an auto enrolment Standard Life Group Flexible Retirement Plan. Each month it shows the employee's contribution and then that as a grossed up rate with 20% included. In the SIPP each month an additional 20% tax re employee contibution shows.
So, if employee's total contributions are £16,900 (£2,500 into auto enrolment scheme, plus £14,400 into their own SIPP) what should the amount against the personal pension payments line (under additions to your personal allowance) on the tax coding be?
So, it looks like the £2500 is taken from your net pay.
If that is the case the total £16900 is made up to £21125 by HMRC. That is relief at 20% rate.
As you are a 40% taxpayer you are due additional relief of £4225. This would be obtained by increasing your tax free allowance by £10562 as 40% of this is £4225.
It looks like HMRC have assumed that you are a 50% taxpayer as the adjustment for someone paying that rate of tax would be £8450 (50% of £8450 is exactly £4225)0 -
The SL scheme is "relief at source"? Then you have received relief at 20%.
The Sipp is "relief at source". You have received relief at 20%.
You earn £95,000 a year and are a 40% tax payer.
You need to claim additional relief of £4225 from HMRC.
They may give you the relief by giving you a higher tax code.
What is your tax code?
https://library.aviva.com/mpen15c.pdf0 -
(£9000 at 40% is £2600.)
Typo for £3,600?0 -
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Thanks again. It's not me.
Person is going back to HMRC again asking them to reduce it.0 -
I'm in the same boat and don't really understand it all.
I want to put a lump sum into my SIPP with the intension of coming out of the 40% tax bracket but I cant work it out.
In theory I think I need to put about £22k into the SIPP but that's on the assumption HMRC realise that £1,000 of my total income is from bank account savings and so should not be taxed, but I don't know if their computer system just recognises it as total income or does it recognise some of my income has come from bank savings and also from Share dividends thus additional allowances should be taken into accountI have a tendency to mute most posts so if your expecting me to respond you might be waiting along time!0
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