HMRC possible dumb question about tax and pension contributions

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  • HMRC possible dumb question about tax and pension contributions
  • Premier Icon scotroutes
    Subscriber

    In my case I pay contributions after tax then the pension company claim it back and stick it in my fund.

    Premier Icon jimdubleyou
    Subscriber

    Are your pension contributions before or after tax?

    If after tax, I think you need to do a tax return to claim them back – or what scotroutes said.

    DT78
    Member

    Contributions come straight from pay by employer so assumed it was before tax. I’m not paying into my own privately organised pension, so didn’t think I’d need to claim it back.

    It’s a civil service pension if that makes any difference.

    In 15 years of employment I’ve never claimed any pension relief as always paye on the employers scheme and therefore thought this was all sorted automatically. Have I made a massive cockup?

    Greybeard
    Member

    Should be automatic through PAYE. The number on your P60 for Taxable Pay is after the pension contributions have been taken off, so if that’s what the tax is worked out on, it’s correct.

    allthepies
    Member

    dt78 wrote:

    Contributions come straight from pay by employer so assumed it was before tax.

    You need to validate that assumption 🙂

    Premier Icon footflaps
    Subscriber

    If you’re a basic rate taxpayer, then the 20% tax reclaim happens automatically by your pension company. If you’re a higher rate tax payer, you need to claim the extra 20% relief back yourself. You don’t need to do self assessment, I just write a letter each year to the tax office with the details and then send me a cheque in return (after several months).

    DT78
    Member

    Just registered at gov.uk to check my tax. It appears I’ve been paying tax on my full income less allowance of 11k.

    I was expecting to have paid tax on my income less allowance and less my pension contributions.

    I’m paye and thought this was automatic. Or am I completely wrong and I pay tax on the contributions? Would make quite a difference….

    Premier Icon Monster101
    Subscriber

    Depends on whether salary sacrifice scheme or from net pay. If on left gross column you get full relief at source on your payslip (salary sacrifice). If on right hand column under deductions tax relief will be given by the pension company. I.e.£80 coming off salary will become £100 at pension. If you are a higher rate taxpayer you might be able to claim extra tax back depending on how much you earn above the higher rate threshold.

    Premier Icon jambalaya
    Subscriber

    You should be getting tax relief at your highest rate (max 40%) so yes the payments are before tax. If this hasn’t happened you will get a tax rebate. Start entering your data and add the pension contributions and you should see a rebate when you hit calc. It would be worth soeaking to your HR/Payroll too

    DrJ
    Member

    What footflaps said except it’s quite easy to claim the money back via your self assessment form. It tells you exactly how to do it in the notes booklet.

    Premier Icon Rubber_Buccaneer
    Subscriber

    I very much doubt the civil service are using salary sacrifice. As you are a member of an employer scheme and the contributions are deducted by payroll they should be deducted before your income tax is calculated. You should not be required to reclaim anything. Some of the comments above are applicable to personal pension scheme contributions made from net pay and aren’t applicable to your situation.

    The only way to be sure is to look at one of your payslips and work it out for yourself, payroll can cock up but I suspect you will find you have not been taxed on your contributions.

    Have a look here

    b r
    Member

    It’s a civil service pension if that makes any difference.

    Yes, as said above.

    And tbh you’re just in a Ponzi scheme anyway 🙂

    Premier Icon footflaps
    Subscriber

    You should be getting tax relief at your highest rate (max 40%) so yes the payments are before tax. If this hasn’t happened you will get a tax rebate.

    Only if you tell them. They don’t automatically get informed about pension contribution (well they do, with the 20% reclaim), but that won’t trigger the extra 20% tax back for higher earners…

    What footflaps said except it’s quite easy to claim the money back via your self assessment form. It tells you exactly how to do it in the notes booklet.

    remember to divide by 0.8 otherwise you’ll loose out!

    Premier Icon Rubber_Buccaneer
    Subscriber

    Also note that you are an employee of the civil service having your pension contributions deducted by payroll. What footflaps is saying is unlikely to apply to you

    Speak to HR, Payroll or a union rep about it before relying on anything you read here. The various posts are conflicting, confusing and based on peoples own affairs rather than your situation.

    Premier Icon footflaps
    Subscriber

    Also note that you are an employee of the civil service having your pension contributions deducted by payroll.

    No different to most private pensions. You still only get the extra 20% relief (for 40% tax payers) if you tell HMRC. Otherwise you get nought. NB you claim back for missed years, so all is not lost.

    Premier Icon Rubber_Buccaneer
    Subscriber

    In the main, completely different. Check the information in the link I gave, this one and see the three ways of receiving tax relief. My guess (and only a guess) is that the OP falls into category 1, you into category 2 and at least one other into category 3

    Just to be clear I am referring to this from the pensions advisory service

    Workplace pension schemes

    There are three different ways that you may receive tax relief on your contributions.

    1. Your employer deducts your contributions from your pay before they deduct tax from your pay.

    This means that you receive tax relief at the highest rate of tax that you pay. This is called a net pay arrangement. You can find out if you’re in one of these schemes by looking at the scheme booklet or asking the scheme administrator.

    2. Your employer takes your contribution from your net pay (after tax has been deducted but before they pay you) and pays this to your pension provider on your behalf.

    This method is most likely if you’re a member of a group personal pension, group self-invested personal pension or group stakeholder pension scheme, but could also apply to other types of personal pension schemes. This is called relief at source.

    The pension provider then claims back basic rate tax at 20% from HMRC, and adds this to your pot. So, for example, if your employer has deducted a contribution of £80 from your net pay, your pension provider claims back a further £20 so a total gross contribution of £100 is paid into your pension.

    If you’re a higher rate taxpayer, you can claim further tax relief (at your higher rate less the basic rate already claimed on your behalf) from HMRC. This is usually claimed through your self-assessment tax return, although HMRC may also adjust your tax code to give you this additional relief.

    3. If you’re paying pension contributions through a salary sacrifice arrangement agreed with your employer, this is treated as an employer contribution, with the same effect for you as receiving tax relief but also with a saving on NI contributions.

    Premier Icon footflaps
    Subscriber

    I was deductions from net pay, which was endlessly incorrectly taxed by HMRC and I had to write to them every year to get the correct rebate. They never got my tax code correct and it’s still wrong every year even though I write and tell them every single year. Still it’s like an annual bonus, they over tax me every month and I get a cheque back once a year for several £k…

    Work has since moved to Salary Sacrifice, so no need to claim anything for that, but I also pay into a SIPP, so claim that back manually just by writing them a letter every year. This is even though they know about it as they give me a unique reference number for the 20% rebate and then demand proof of exactly the same transaction for the extra 20%….

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