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AVC Tax query
homerhotspur
Posts: 260 Forumite
My son made an AVC contribution last tax year. This was via a direct payment, not via the payroll. He has received the relevant certificate and we are about to deal with the relevant claim for tax relief. He is a 40% tax rate . I assumed that the Pension provider would have claimed the basic 20% and added it to his fund, so he would just claim 20% relief but thought he had better check. He has now been told that the Pension Provider had not claimed any tax relief on this amount. Is this normal? It seems odd to me , as surely that is the main point of pension relief- to boost the pension pot-rather than to claim back 40% which, I presume, he can now do? Thanks
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Comments
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Sounds as if his employer operates a pension scheme which is 'net pay' (i.e. contributions are paid from his gross salary, before tax or NI is applied), and that the same principle applies to the AVC offered by the scheme. Presumably he made a direct contribution because he missed the last payroll run of the tax year, so now he just needs to claim tax relief on the whole AVC payment.
The main point of pension tax relief is to encourage pension savings - and being able to claim 40% tax relief tends to do just that!0 -
When I did this, there was no tax rebate added and I had to claim the 40% back from HMRC myself.
Not sure if all schemes are the same.0 -
No, this contribution was an 'additional' contribution and he had to complete a form to send to the Pension Scheme. It was completely outside of his monthly, normal, pension amount via the payroll.Sounds as if his employer operates a pension scheme which is 'net pay' (i.e. contributions are paid from his gross salary, before tax or NI is applied), and that the same principle applies to the AVC offered by the scheme. Presumably he made a direct contribution because he missed the last payroll run of the tax year, so now he just needs to claim tax relief on the whole AVC payment.
The main point of pension tax relief is to encourage pension savings - and being able to claim 40% tax relief tends to do just that!0 -
homerhotspur wrote: »No, this contribution was an 'additional' contribution and he had to complete a form to send to the Pension Scheme. It was completely outside of his monthly, normal, pension amount via the payroll.
Which is why he has to reclaim tax himself.0 -
There have been a few threads about this type of pension payment and a common theme is posters have found it a little tricky to get the tax relief from HMRC.
Most pension payments people make direct to a pension company receive tax relief at source so it is important your son makes it crystal clear to HMRC that no basic rate tax relief has been added.
If he files Self Assessment returns he doesn't claim anything seperately from HMRC, he just includes the pension contribution on his tax return and is taken into account in his Self Assessment tax calculation.0 -
Provided he puts it in the right box on the form!If he files Self Assessment returns he doesn't claim anything seperately from HMRC, he just includes the pension contribution on his tax return and is taken into account in his Self Assessment tax calculation.
Very easy to put it in the box for pension contributions from gross pay and basic rate tax already given!0
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