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    • london.cidade
    • By london.cidade 20th May 19, 3:36 PM
    • 117Posts
    • 17Thanks
    london.cidade
    Pension - Tax relief
    • #1
    • 20th May 19, 3:36 PM
    Pension - Tax relief 20th May 19 at 3:36 PM
    I have worked for a company from 16th of april 2018 to 1st of Feb 2019.
    Then after an unemployment period, i restarted to work for another company.

    I am on 40% top rate.

    1) for 2018-2019 i have a pension scheme which is about 5k
    I guess i can carry unused 35k annual allowances to this year 2019-2020?

    2) for 2019-2020 i have 40k max pension allowance. My question is that in case i have 80k salary. If i pay 75k into pension pot (8k will be paid by the company) Am i eligible to get 40% tax relief for 67k pension contribution? If yes is it automatic or i need to claim it?

    Thank you
Page 1
    • BoGoF
    • By BoGoF 20th May 19, 3:41 PM
    • 5,309 Posts
    • 5,176 Thanks
    BoGoF
    • #2
    • 20th May 19, 3:41 PM
    • #2
    • 20th May 19, 3:41 PM
    1) Not sure what you mean - you paid 5000 into a pension scheme in 18/19.

    2) is it a DC or DB scheme? No you wouldn't get 40% relief on the full amount. You get higher rate relief on the amount of income you pay higher rate tax on.
    • london.cidade
    • By london.cidade 20th May 19, 3:56 PM
    • 117 Posts
    • 17 Thanks
    london.cidade
    • #3
    • 20th May 19, 3:56 PM
    • #3
    • 20th May 19, 3:56 PM
    Both are dc.
    5k in the pension pot atm. Thanks
    • Paul_Herring
    • By Paul_Herring 20th May 19, 6:50 PM
    • 6,944 Posts
    • 3,622 Thanks
    Paul_Herring
    • #4
    • 20th May 19, 6:50 PM
    • #4
    • 20th May 19, 6:50 PM
    Am i eligible to get 40% tax relief for 67k pension contribution?
    No, you only get relief for tax that you've actually paid over the personal allowance.

    You'll get an immediate 20% relief if contributing out of net wages, it won't be taxed at all (so no relief at all) if salary sacrifice.

    If yes is it automatic or i need to claim it?
    If you got 20% relief through contributing net wages, you'll need self assessment to get the other 20% for that which was taxed at 40%. For SS, there's nothing to reclaim.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • london.cidade
    • By london.cidade 20th May 19, 8:57 PM
    • 117 Posts
    • 17 Thanks
    london.cidade
    • #5
    • 20th May 19, 8:57 PM
    • #5
    • 20th May 19, 8:57 PM
    No, you only get relief for tax that you've actually paid over the personal allowance.
    You'll get an immediate 20% relief if contributing out of net wages, it won't be taxed at all (so no relief at all) if salary sacrifice
    .
    Originally posted by Paul_Herring
    thanks, but wouldnt the unused 35k (from2018-19) carried out to the current year? so, wouldnt total allowance be 75k for 2019-20?

    yes it will be through salary sacrifice. so no tax relief. but i will get immediate 20% relief for net wages of 75k. do i get it correct? thank you

    thank you!
    Last edited by london.cidade; 20-05-2019 at 9:02 PM. Reason: added more context
    • Dazed and confused
    • By Dazed and confused 20th May 19, 8:59 PM
    • 5,388 Posts
    • 2,860 Thanks
    Dazed and confused
    • #6
    • 20th May 19, 8:59 PM
    • #6
    • 20th May 19, 8:59 PM
    Pension tax relief has a few permutations and they don't all result in the same outcome.

    Are you paying into a relief at source scheme like a personal pension, SIPP or stakeholder pension?

    Or is it salary sacrifice?

    Or "net pay" arrangement?
    • xylophone
    • By xylophone 20th May 19, 9:02 PM
    • 31,391 Posts
    • 19,463 Thanks
    xylophone
    • #7
    • 20th May 19, 9:02 PM
    • #7
    • 20th May 19, 9:02 PM
    https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward
    • Paul_Herring
    • By Paul_Herring 20th May 19, 9:20 PM
    • 6,944 Posts
    • 3,622 Thanks
    Paul_Herring
    • #8
    • 20th May 19, 9:20 PM
    • #8
    • 20th May 19, 9:20 PM
    thanks, but wouldnt the unused 35k (from2018-19) carried out to the current year? so, wouldnt total allowance be 75k for 2019-20?
    Yes, the allowance carries over, and providing you're earning 75K this tax year, you can use it.

    yes it will be through salary sacrifice. so no tax relief. but i will get immediate 20% relief for net wages of 75k. do i get it correct? thank you
    If it's salary sacrifice, you get no tax relief, because it doesn't get taxed to begin with; the contribution is removed from your gross salary before the NI and IT calculations are worked out. You aren't contributing net wages, your employer is contributing gross wages on your behalf.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • Dox
    • By Dox 20th May 19, 9:20 PM
    • 1,639 Posts
    • 1,238 Thanks
    Dox
    • #9
    • 20th May 19, 9:20 PM
    • #9
    • 20th May 19, 9:20 PM
    yes it will be through salary sacrifice. so no tax relief. but i will get immediate 20% relief for net wages of 75k. do i get it correct? thank you
    Originally posted by london.cidade
    You're confusing two issues. If a pension contribution is made by salary sacrifice, it is classed as an employer contribution and your DC pension provider receives the contribution gross. You aren't taxed on the amount sacrificed, which saves you both tax and NI.

    Could be an issue if you are sacrificing 75K from an 80K salary - you'll take yourself below the National Minimum Wage level, which you can't do (even if you agree!).
    • london.cidade
    • By london.cidade 20th May 19, 9:44 PM
    • 117 Posts
    • 17 Thanks
    london.cidade
    Pension tax relief has a few permutations and they don't all result in the same outcome.

    Are you paying into a relief at source scheme like a personal pension, SIPP or stakeholder pension?

    Or is it salary sacrifice?

    Or "net pay" arrangement?
    Originally posted by Dazed and confused
    it is salary sacrifice, but not sure of net pay arrangement..HR contact is on holidays this week, couldnt get the details/

    but it is an Aviva pension scheme (fund), thank you
    • Dazed and confused
    • By Dazed and confused 20th May 19, 9:55 PM
    • 5,388 Posts
    • 2,860 Thanks
    Dazed and confused
    You don't get any pension tax relief with salary sacrifice.

    The salary sacrifice means your taxable salary is less and as a result you pay less tax (and National Insurance) on your non existent salary.

    In return your employer contributes the sacrificied salary to the pension fund. As it's an employer contribution there is no pension tax relief due

    So say for example your taxable salary would normally be 67k and the tax due on that was 14,300. If you salary sacrifice down to say 5k you will save 14,300 in tax. But if you sacrifice down to 12,500 you also save 14,300.

    This all assumes you have no other taxable income and have not applied for Marriage Allowance.
    Last edited by Dazed and confused; 20-05-2019 at 9:57 PM.
    • Dox
    • By Dox 20th May 19, 11:34 PM
    • 1,639 Posts
    • 1,238 Thanks
    Dox

    So say for example your taxable salary would normally be 67k and the tax due on that was 14,300. If you salary sacrifice down to say 5k you will save 14,300 in tax. But if you sacrifice down to 12,500 you also save 14,300.
    Originally posted by Dazed and confused
    As above - you can't take your salary below National Minimum Wage.
    • FatherAbraham
    • By FatherAbraham 21st May 19, 7:30 AM
    • 1,004 Posts
    • 763 Thanks
    FatherAbraham
    You don't get any pension tax relief with salary sacrifice.

    The salary sacrifice means your taxable salary is less and as a result you pay less tax (and National Insurance) on your non existent salary.

    In return your employer contributes the sacrificied salary to the pension fund. As it's an employer contribution there is no pension tax relief due

    So say for example your taxable salary would normally be 67k and the tax due on that was 14,300. If you salary sacrifice down to say 5k you will save 14,300 in tax. But if you sacrifice down to 12,500 you also save 14,300.

    This all assumes you have no other taxable income and have not applied for Marriage Allowance.
    Originally posted by Dazed and confused
    One doesn't save the tax - one defers the taxation, to a future point where one normally has a low tax rate.

    What one definitely saves, but only via salary sacrifice, is the National Insurance contribution.
    Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...
    THE WAY TO WEALTH, Benjamin Franklin, 1758 AD
    • Paul_Herring
    • By Paul_Herring 21st May 19, 8:19 AM
    • 6,944 Posts
    • 3,622 Thanks
    Paul_Herring
    One doesn't save the tax - one defers the taxation...
    .. on 75% of the value of the then contributions, at the point the pension is drawn, but all this is going off into the weeds with pedantry, and is unrelated to tax treatment at the point of contribution, which is the subject under discussion.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
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