Tax Breaks
NorthernGeezer_2
Posts: 153 Forumite
I understand that as a recent retiree with no future earnings i am entitled to contribute £2880 to my pension pot annually till i'm 75 to take advantage of the tax break.
However, this tax year i have also earned one months salary in April.
Can i also contribute this gross amount to my pension pot to take advantage of the tax break?
Also, given i paid income tax on my April salary, do i have to claim this back myself or will HMRC sort this out?
However, this tax year i have also earned one months salary in April.
Can i also contribute this gross amount to my pension pot to take advantage of the tax break?
Also, given i paid income tax on my April salary, do i have to claim this back myself or will HMRC sort this out?
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Comments
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NorthernGeezer wrote: »I understand that as a recent retiree with no future earnings i am entitled to contribute £2880 to my pension pot annually till i'm 75 to take advantage of the tax break.
However, this tax year i have also earned one months salary in April.
Can i also contribute this gross amount to my pension pot to take advantage of the tax break?
Also, given i paid income tax on my April salary, do i have to claim this back myself or will HMRC sort this out?
How much did you earn in your April salary?
Was it more than £3600?0 -
AAUI, you can pay the greater of 2880 or your annual gross income.NorthernGeezer wrote: »I understand that as a recent retiree with no future earnings i am entitled to contribute £2880 to my pension pot annually till i'm 75 to take advantage of the tax break.
However, this tax year i have also earned one months salary in April.
Can i also contribute this gross amount to my pension pot to take advantage of the tax break?
Also, given i paid income tax on my April salary, do i have to claim this back myself or will HMRC sort this out?
If you paid tax on one months salary and you don't do self assessment, HMRC may get around to refunding you when hell freezes over. Just tell them, it was just an odd month of salary not to be repeated and they might well just refund you with no fuss. Don't ask you maybe don't get.0 -
My gross for April was £2000.
It is my intention at some point in this tax year to withdraw up to my personal tax allowance from my pension pot, i therefore need to take in to account amounts already earned to be able to reclaim tax paid.0 -
HMRC automatically review your tax each year and if you overpaid (or underpaid) then they will notify you, usually between May/June and November after the tax year ends.
https://www.gov.uk/tax-overpayments-and-underpayments0 -
Clicking the link and reading the information i don't think i fall in to any of those P800 categories.
However, it is my intention to withdraw an amount up to my tax threshold in this tax year and so i'm 'expected' to 'pay' tax under an emergency code until HMRC issue my provider with a correct coding notice.
Its at this point i expect HMRC to realise its they who owe me money, not the other way around, either way, i'm assuming i wont receive any rebate till after the end of the tax year?0 -
NorthernGeezer wrote: »Its at this point i expect HMRC to realise its they who owe me money, not the other way around, either way, i'm assuming i wont receive any rebate till after the end of the tax year?
You tell 'em here
https://www.gov.uk/government/publications/flexibly-accessed-pension-payment-repayment-claim-p55
if you do self asessment you can use the same Gov gateway account, else do it by post. It worked okay for me, took about a month
In response to your original question, if you earned £2k in one tax year then the maximum you can put in your pension is still £3600, made up of the £2880 you put in plus the £720 refund of the notional tax you didn't pay. You can probably draw about the personal allowance of 11850 this year. Although you earned £2k, without pension contributions so the amount you could take from your crystallised pension tax-free would be £11850-2000=£9850, you contributed more than the £2000 you earned to your pension this year.
I have never understood whether without any earnings you can draw a total of £11850+2880 or if it's £11850 + £3600 from a DC if you're contributing £3600 net to the pension in that year, given that the difference between 2880 and 3600 is notional. But since you earned less than £2880 you are good for the personal allowance still0 -
"However, it is my intention to withdraw an amount up to my tax threshold in this tax year and so i'm 'expected' to 'pay' tax under an emergency code until HMRC issue my provider with a correct coding notice."
What you do is withdraw a small amount. That will be taxed on an emergency code. It will also cause HMRC to supply a tax code to your pension provider. Then you can withdraw whatever you want and be taxed more sensibly.0 -
Cynic that i am i'm still expecting problems with HMRC as whilst i was employed i had some of my wife's tax coding from the married persons allowance.
Previous posts on here have suggested that HMRC will take previous coding's in to account but i'm not convinced they are that savvy.
I will take a small initial amount from my pot just to get the ball rolling.0 -
In response to your original question, if you earned £2k in one tax year then the maximum you can put in your pension is still £3600, made up of the £2880 you put in plus the £720 refund of the notional tax you didn't pay. You can probably draw about the personal allowance of 11850 this year. Although you earned £2k, without pension contributions so the amount you could take from your crystallised pension tax-free would be £11850-2000=£9850, you contributed more than the £2000 you earned to your pension this year.
agreed. if the only taxable income is £2k salary + whatever is taken from the pension, then £9,850 is the maximum gross taxable income that can be taken from the pension without paying any income tax (obviously, that's in addition to taking a tax-free lump sum).
and the £720 reclaimed inside the pension makes it feel like paying minus £720 in income tax ... though officially, you've paid 0 income tax.I have never understood whether without any earnings you can draw a total of £11850+2880 or if it's £11850 + £3600 from a DC if you're contributing £3600 net to the pension in that year, given that the difference between 2880 and 3600 is notional. But since you earned less than £2880 you are good for the personal allowance still
perhaps i disagree with you here. if the only taxable income is what's taken from the pension, then you can take £11,850 gross without paying tax. if you take more, you'll pay 20% on the next bit of income.
of course, you might be happy to draw £11,850+£3,600, paying £720 income tax. because £720 is being reclaimed inside your pension. so you may say you are only paying 0 overall. but you've given up the chance to pay minus £720. and the marginal tax on the last bit of pension income you're drawing is 20%.
note that, when pension contributions are taken into account in a tax calculation, they do not lead to more income being untaxed. they lead to the basic rate being widened (which effectively applies any higher rate tax relief). and the 20% reclaimed inside the pension is not brought into the calculation at all (which is how the basic rate relief is applied).0 -
Clicking the link and reading the information i don't think i fall in to any of those P800 categories
They will just be common examples, the basic principle is things will be reviewed after the end of the tax year.0
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