Annual pension limit and tax relief

[deuxgarcons]

I am a bit confused on whether higher rate tax relief applies to the contribution limit. Eg if my employer pays 20k into my scheme and I pay 16k which grosses up 20% to 20k. That is a total of 40k which is the annual limit. As a 40% tax payer I get additional relief so would that take me over the 40k limit. I can't seem to find this answer anywhere. Thanks

I believe you get the extra relief asa higher rate tax payer in your salary/ as an adjustment to your tax code it doesn't actually get paid to the pension company. Someone will be along to explain it in a more comprehensive manner.
I assume this means you will be within your max contribution limit.

The maximum of £40k includes all tax relief on the combination of your contribution plus your employers contribution plus all the tax relief.

Some employers contributions include the tax relief relief some don’t - it depends if your employer is using tax relief at source or net pay.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/tax-relief-and-your-pension

You only get 20% tax relief put in your pension, the other 20% (if higher rate) you get autoamtically in your pay packet due to less tax paid (if net pay) or have to claim it back yourself (if tax relief at source) from HMRC.

@DemonSpawn @Beenalongwinter so I think what you are both saying in different ways is that because that "additional" tax relief doesn't actually get paid into my pension scheme and it effectively comes back to me that it doesn't result in a breach of the 40k limit? And thanks so much for replying

Yes the additional 20% on your higher rate tax band amount is refunded to you by HMRC when you put in a claim via your self assessment. So that amount does not get included in the 40k allowance.

Thanks @PlainSkyr that's really helpful.

One more thing to note, check if your employer puts in £20k which then gets £5k tax relief added, or if your employer puts in £16k which gets £4k added.

This will affect how much of the £40k you have left for you to put in.

If your employer contributes £20k which gets £5k tax relief then that only leaves you £15k including tax relief to contribute so that would be your £12k plus £3k tax relief.

Employers’ contributions are separate from employee contributions and are not tax-relieved.

Just to check, the £40k annual limit is only true for a few days longer - after 6 April 2023, the Government has confirmed that the 'pensions annual allowance" will rise to £60,000. So depending on which year you are thinking of, going over £40k input might be no problem at all.

https://www.moneysavingexpert.com/news/2023/03/pension-savers-tax-relief-allowance-budget-2023/

The limit will go up to £60k at someone said above.
You say you have paid in £16k and this grosses up to £20k, there is no more tax relief after this, this is your tax relief.

I pay mine in via salary sacrifice, this comes out of my before tax pay and therefore I do not claim any additional tax relief. (Also lowers my salary for tax purposes, which is the best way of paying into a pension)

But as the poster above says the 40k include everything company contribution, your contribution and tax relief.

There is additional tax relief but it is not paid to HMRC It is paid directly to the higher rate tax (40% ) payer by way of an adjustment to their tax code or via self assessment.,