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    • carshells
    • By carshells 17th May 18, 8:02 PM
    • 4Posts
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    carshells
    Pension Tax relief help
    • #1
    • 17th May 18, 8:02 PM
    Pension Tax relief help 17th May 18 at 8:02 PM
    Hello
    A bit of explanation if possible, please.
    I'm a 40% tax payer and last year (2017/18) paid 8400 into my Stakeholder pension and got 2100 on top ( at 20%) . This was declared on my tax return and I've just received near enough 2100 back into my bank. However, I'm confused why my tax code has changed for 1185L to 1710L ( and it's noted its because of pension payments on HMRC website of 5251, which is just about 2.5 x the amount of tax relief I received ( why is this the amount?).Is this a double hitter? Will my tax code revert,now I've had a tax rebate? Or is it an assumption that i will pay that amount into my pension and therefore it's covering the tax relief immediately on my salary?

    Further, I am increasingly payments to 14100 this year. What will happen next year to my tax code? Will the amount allowable increase again as I assume it? Will I get another tax rebate on the full amount or just the difference between 2100 and expected tax relief of 3525.

    Thanks very much
Page 1
    • Dazed and confused
    • By Dazed and confused 17th May 18, 8:34 PM
    • 2,925 Posts
    • 1,425 Thanks
    Dazed and confused
    • #2
    • 17th May 18, 8:34 PM
    • #2
    • 17th May 18, 8:34 PM
    This year's tax code will never give tax relief for a pension payment made in an earlier tax year.

    The relief due for last year will be calculated through your self assessment return and that seems to have happened as expected.

    Note as a higher rate payer you do not receive an extra 20%. The pension contribution simply increases the amount of basic rate tax you can pay, which in turn reduces the 40% tax payable. This can be about 20% if you pay enough 40% tax but it isn't a fixed 20% extra just because you have paid some higher rate tax.

    HMRC have now included an adjustment to your current tax code on the assumption that you pay the same pension amount again this year. The tax code is allowing relief for the assumed payment in this tax year not last year's actual payment.

    In a simple scenario a gross payment of 10,500 will save you 2,100 in higher rate tax (10,500 x 40% less 20% given at source).

    A positive adjustment to your tax code of 5,251 will mean your employer will deduct 2100.40 less tax (5,251 x 40%).

    You can opt out leave the code as it is and claim the extra tax relief due for this tax year on your next self assessment return or you could ask for the coding amount to be amended to reflect the increased payment you are going to make in this tax year.

    If you do advise HMRC of this it is important you make it clear what the gross figure is. 14,100 will not generate extra tax relief of 3,525 so I presume this is the net contribution but that isn't totally clear from your post.
    Last edited by Dazed and confused; 17-05-2018 at 8:39 PM.
    • carshells
    • By carshells 17th May 18, 9:07 PM
    • 4 Posts
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    carshells
    • #3
    • 17th May 18, 9:07 PM
    • #3
    • 17th May 18, 9:07 PM
    Thank you so much ! Very enlightening.
    • AlanP
    • By AlanP 18th May 18, 12:38 PM
    • 1,241 Posts
    • 896 Thanks
    AlanP
    • #4
    • 18th May 18, 12:38 PM
    • #4
    • 18th May 18, 12:38 PM
    If you delve deep enough into your Personal Tax Account there is a way to update the pension contribution amount on there so that it gets picked up and your code changed. It's well hidden and I can't remember how to get to it but it is (or at least was) there a while ago.

    Alternatively a call to them should be enough to get the adjustment made.
    • carshells
    • By carshells 21st May 18, 9:11 PM
    • 4 Posts
    • 0 Thanks
    carshells
    • #5
    • 21st May 18, 9:11 PM
    • #5
    • 21st May 18, 9:11 PM
    Thanks very much!
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