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    • fluffig
    • By fluffig 12th Feb 18, 12:54 PM
    • 122Posts
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    fluffig
    Tax Code Query - personal pension payments
    • #1
    • 12th Feb 18, 12:54 PM
    Tax Code Query - personal pension payments 12th Feb 18 at 12:54 PM
    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!
Page 1
    • purdyoaten2
    • By purdyoaten2 12th Feb 18, 1:12 PM
    • 868 Posts
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    purdyoaten2
    • #2
    • 12th Feb 18, 1:12 PM
    • #2
    • 12th Feb 18, 1:12 PM
    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.)
    Last edited by purdyoaten2; 12-02-2018 at 3:34 PM.
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    • fluffig
    • By fluffig 12th Feb 18, 2:29 PM
    • 122 Posts
    • 397 Thanks
    fluffig
    • #3
    • 12th Feb 18, 2:29 PM
    • #3
    • 12th Feb 18, 2:29 PM
    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?
    • purdyoaten2
    • By purdyoaten2 12th Feb 18, 3:03 PM
    • 868 Posts
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    purdyoaten2
    • #4
    • 12th Feb 18, 3:03 PM
    • #4
    • 12th Feb 18, 3:03 PM
    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?
    Originally posted by fluffig
    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)
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    • xylophone
    • By xylophone 12th Feb 18, 3:27 PM
    • 25,577 Posts
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    xylophone
    • #5
    • 12th Feb 18, 3:27 PM
    • #5
    • 12th Feb 18, 3:27 PM
    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.pdf
    • xylophone
    • By xylophone 12th Feb 18, 3:30 PM
    • 25,577 Posts
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    xylophone
    • #6
    • 12th Feb 18, 3:30 PM
    • #6
    • 12th Feb 18, 3:30 PM
    (9000 at 40% is 2600.)
    Typo for 3,600?
    • purdyoaten2
    • By purdyoaten2 12th Feb 18, 3:34 PM
    • 868 Posts
    • 421 Thanks
    purdyoaten2
    • #7
    • 12th Feb 18, 3:34 PM
    • #7
    • 12th Feb 18, 3:34 PM
    Typo for 3,600?
    Originally posted by xylophone
    Yep - as earlier in the same sentence. Thanks!
    purdyoaten lost his password
    • fluffig
    • By fluffig 13th Feb 18, 6:29 PM
    • 122 Posts
    • 397 Thanks
    fluffig
    • #8
    • 13th Feb 18, 6:29 PM
    • #8
    • 13th Feb 18, 6:29 PM
    Thanks again. It's not me.
    Person is going back to HMRC again asking them to reduce it.
    • singhini
    • By singhini 14th Feb 18, 12:23 AM
    • 335 Posts
    • 200 Thanks
    singhini
    • #9
    • 14th Feb 18, 12:23 AM
    • #9
    • 14th Feb 18, 12:23 AM
    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 account
    Last edited by singhini; 14-02-2018 at 12:26 AM.
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