Pension - Tax relief

london.cidade
london.cidade Posts: 137 Forumite
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in Pensions, annuities & retirement planning
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
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Comments

  • BoGoF
    BoGoF Posts: 7,101 Forumite
    Name Dropper First Anniversary First Post
    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
    london.cidade Posts: 137 Forumite
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    Both are dc.
    5k in the pension pot atm. Thanks
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    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":
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  • london.cidade
    london.cidade Posts: 137 Forumite
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    edited 20 May 2019 at 10:02PM
    Paul_Herring wrote: »
    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
    .

    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!
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    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
    xylophone Posts: 44,338 Forumite
    Name Dropper First Anniversary First Post
    https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward
  • Paul_Herring
    Paul_Herring Posts: 7,481 Forumite
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    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
    Dox Posts: 3,116 Forumite
    First Anniversary Name Dropper First Post
    london.cidade wrote: »
    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

    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
    london.cidade Posts: 137 Forumite
    First Anniversary First Post
    Dazed_and_confused wrote: »
    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?

    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
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    edited 20 May 2019 at 10:57PM
    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.
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