Pension tax relief--how do i know if i am entitled to higher rate relief?

[Arnoldthecat]

Hi all,

Maths is not my strong point.

In a past tax year i paid into a sipp. I got the automatic basic tax relief about a month later credited to the sipp. I entered the total amount i.e amount i put in plus basic relief into my SA. How can i work out if i am entitled to any higher rate TR? This was for tax year 2017/18... thanks..

PS if i was entitled,how would it be paid to me ??

If you paid HR tax, you’ll get relief if you’ve put it in your SA. Simple.

Are you an employee? Did you pay into the sipp from your take home pay (from your bank account)? If so they add 20% onto your contribution but you complete a tax return to get back the additional 20% via a tax rebate. If you are completing a tax return read the way to calculate pension contributions very carefully to ensure you enter the correct amount.

www.gov.uk/income-tax-rates - this shows you the tax bands.

If you pay into a pension as salary sacrifice via your payroll then the contribution is taken from your gross salary.

Actually, I've been a little curious about this as well. I have a pension kicking around from some years ago, into which I haven't made contributions for some time, and also one of those NEST things. Generally, I work PAYE and don't pay HR tax, but because I've picked up some freelance work, I may earn over the HR tax band this year. If I check my income in March 2020 and find that it exceeds the HR tax threshold, is it as simple as: I pay the excess into a pension before April 5th, and then all my freelance (which is paid gross) will be taxed at the standard rate because the bit that takes me over the HR threshold will have been put into a pension? Is it as simple as that?

Yes. Simple as that

Im an employee but i paid into a sipp outside of my employment. Its my understanding that the SIPP contribution effectively adjusts your tax band so the standard basic and higher limits change ?? This is the confusing bit..

Thanks, OKhitmewithit.

You may need to separately claim the HR tax relief through self assembly as a lot of pension schemes only add 20% basic rate

You may need to separately claim the HR tax relief through self assembly as a lot of pension schemes only add 20% basic rate

No schemes add more than basic rate tax. There is no 'may'.

1. You salary sacrifice: you don't need to claim the tax it's already taken care of as you never saw the money it went gross (before tax) to the pension.
2. You pay out of your taxed money: the scheme claims 20%, you get any other tax back via self assessment.

There are no other variables except in very very rare situations where a CIMP or a COMP allow gross payments. GP's also do it a bit differently, but all are aware of this.

DH is a high earner, he has to do a self assessment to get the higher rate tax relief.

I say he, I do it every year for him. The extra is paid back as an allowance through his tax code.

I dont (or haven't yet) phone a self assessment - will probably have to do one in future - but I'm an employee paying higher rate tax. Realised the way in which my pension contributions were being taken meant I wasn't getting the HR tax relief. I phoned HMRC & explained the situation. The clerk said I was entitled to a rebate (I got a cheque for £400 a week later) and she adjusted my tax code there and then.

*done a self assessment!

Confused here about claiming Tax relief, dh is a higher rate tax payer, paid through paye but has been doing a self assessment since the child benefit system changed. He is adamant he doesn’t qualify to claim the additional 20% tax relief on his employer pension which is deducted at source. I disagree, anyone know which one of us is correct?!

@Rugbylife check with his employer but if it's being deducted through PAYE he's probably already getting the full tax relief he's entitled to. Reason being is that pension contributions via work are often deducted from the pre-tax salary then he is taxed on the rest.

So if his monthly earnings are £4,000 and his pension contributions are £200 then his tax is worked out on £3,800 not £4,000 so he's getting the full tax relief and not paying tax on the contributions he's making.

Another example, if someone is earning £50,000 pa but pay £20,000 pa into a pension then their taxable income is £30,000 pa.

It's when money which has already been taxed and then paid into a pension you can claim the tax back. Providers automatically add 20% then the rest is claimed via self assessment. If the contributions are taken pre-tax then he's not paid tax on them and therefore doesn't need to reclaim it.