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    • Stones
    • By Stones 16th May 19, 5:20 PM
    • 4Posts
    • 0Thanks
    Stones
    Tax Relief on Pension Payment
    • #1
    • 16th May 19, 5:20 PM
    Tax Relief on Pension Payment 16th May 19 at 5:20 PM
    Hi,
    I currently have 50K sitting in a Cash ISA (earning 1.35%) and as I don't really need access to all of it, I thought it would be sensible to add 25K to my company pension (DC scheme).

    I spoke with my pension company who said as my payments are received from my employer via salary sacrifice, it is not set up to include the tax relief automatically (additional 5k), and that I will have to claim it back myself by self assessment.

    I did call HMRC, which was painful to say the least, and was left more than a little confused (they clearly didn't have a clue what I was talking about).

    I do file a self assessment for some rental income I receive, but have not completed 2018/19 yet.

    If I make the payment, does this mean I will have to wait until after April next year, and include it in 2019/20 self assessment?

    Will I get 5K to put in my pension (which is what I want), or will they just adjust my tax code and offset it against the tax on my rental income?

    Or is there a more obvious way of doing this I am missing?

    Any help appreciated.

    Thanks.
Page 1
    • BoGoF
    • By BoGoF 16th May 19, 5:44 PM
    • 4,393 Posts
    • 3,931 Thanks
    BoGoF
    • #2
    • 16th May 19, 5:44 PM
    • #2
    • 16th May 19, 5:44 PM
    You would have to claim it in your 19/20 Tax Return and would reduce your tax liabilty accordingly or create an overpayment of tax. It will not go into your pension scheme.

    Only way to get the tax relief added would be to open a seperate personal pension/SIPP.
    • Stones
    • By Stones 16th May 19, 6:07 PM
    • 4 Posts
    • 0 Thanks
    Stones
    • #3
    • 16th May 19, 6:07 PM
    • #3
    • 16th May 19, 6:07 PM
    Ok, thanks for that, as I suspected. Nothing is ever simple with the government is it.......

    If there any reason why I can't just open another personal pension with 25K, which will then become 30K with tax relief added immediately, and then just transfer it all to my company scheme? (I have already transferred a couple of old pensions to it recently, and prefer having it all in one place).

    Or would that be stupid?
    • xylophone
    • By xylophone 16th May 19, 6:21 PM
    • 29,475 Posts
    • 17,946 Thanks
    xylophone
    • #4
    • 16th May 19, 6:21 PM
    • #4
    • 16th May 19, 6:21 PM
    https://www.standardlife.co.uk/c1/guides-and-calculators/managing-your-pension-annual-allowance.page

    If you pay 25000 net into a personal pension this equates to a gross contribution of 31,250.
    • FatherAbraham
    • By FatherAbraham 16th May 19, 7:03 PM
    • 982 Posts
    • 741 Thanks
    FatherAbraham
    • #5
    • 16th May 19, 7:03 PM
    • #5
    • 16th May 19, 7:03 PM
    Hi,
    I currently have 50K sitting in a Cash ISA (earning 1.35%) and as I don't really need access to all of it, I thought it would be sensible to add 25K to my company pension (DC scheme).

    I spoke with my pension company who said as my payments are received from my employer via salary sacrifice, it is not set up to include the tax relief automatically (additional 5k), and that I will have to claim it back myself by self assessment.

    I did call HMRC, which was painful to say the least, and was left more than a little confused (they clearly didn't have a clue what I was talking about).

    I do file a self assessment for some rental income I receive, but have not completed 2018/19 yet.

    If I make the payment, does this mean I will have to wait until after April next year, and include it in 2019/20 self assessment?

    Will I get 5K to put in my pension (which is what I want), or will they just adjust my tax code and offset it against the tax on my rental income?

    Or is there a more obvious way of doing this I am missing?

    Any help appreciated.

    Thanks.
    Originally posted by Stones
    There is a less obvious, and more beneficial, way of doing it.

    Since your employer uses salary sacrifice, your pension contributions are avoiding National Insurance.

    You should therefore consider increasing your pension contributions from salary, whilst consuming your ISA savings to compensate for the reduction in take-home pay.

    This way, you will immediately receive all tax relief, as well as not having to pay National Insurance contributions on your pension savings.

    You may not use salary sacrifice to reduce your gross salary below the National Minimum Wage.
    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
    • Stones
    • By Stones 16th May 19, 7:29 PM
    • 4 Posts
    • 0 Thanks
    Stones
    • #6
    • 16th May 19, 7:29 PM
    • #6
    • 16th May 19, 7:29 PM
    I have just increased my salary sacrifice to 40%, and didn't really want to go higher at present (although I may in future).

    The other option is transfer it to my SS Isa (Vanguard 60/40), although obviously without the tax relief.

    Guess I will have to do some thinking.......
    • ColdIron
    • By ColdIron 16th May 19, 7:38 PM
    • 5,199 Posts
    • 7,064 Thanks
    ColdIron
    • #7
    • 16th May 19, 7:38 PM
    • #7
    • 16th May 19, 7:38 PM
    FatherAbraham's suggestion is a good one, I'd reconsider. What is the reason you don't want to increase your salary sacrifice contribution?
    • Dazed and confused
    • By Dazed and confused 16th May 19, 7:39 PM
    • 4,738 Posts
    • 2,434 Thanks
    Dazed and confused
    • #8
    • 16th May 19, 7:39 PM
    • #8
    • 16th May 19, 7:39 PM
    Given the fairly significant salary sacrifice already in place will you actually have sufficient earned income to be able to contribute 31,250 to a pension in the current tax year?
    • Stones
    • By Stones 16th May 19, 8:00 PM
    • 4 Posts
    • 0 Thanks
    Stones
    • #9
    • 16th May 19, 8:00 PM
    • #9
    • 16th May 19, 8:00 PM
    Salary is 42500 + bonus (unknown), so with 40% SS (plus a miserly 4% from the company) that equates to 18700 - looks like it was a good job I checked on here first as that rules out adding an extra 25K with tax relief I guess. (although I could add a lower amount).

    My thinking was that although it is nice having 50k in cash for security, it is just eroding with inflation, and my pension does need some serious topping up. And I've just paid off my mortgage.

    Will look again at the salary sacrifice side of things as a solution.
    • crv1963
    • By crv1963 17th May 19, 8:47 AM
    • 842 Posts
    • 1,906 Thanks
    crv1963
    Father Abraham suggestion is probably best as ColdIron says. Salary Sacrifice down to the minimum wage level, use the ISA to top up the shortfall in income until the ISA is either exhausted or you feel you have dropped it to a level that you don't want to go under.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
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