Hi all, with regards to the above, I am unsure what the best way is to approach this.
example of his calculation (se):
Pay, pensions, profit etc
£37,500.00
@ 20%
£7,500.00
£16000.00
@ 40%
£6400.
He has a private pension deducted from his salary (2k). He knows from checking his pension statements that 20% of tax relief is claimed on his contributions. Therefore he should be able to claim back the an additional 20% through his self assessment.
The above makes sense to me, but how would this be done, can it be done via se tax return or will he need to contact HMRC and explain his situation. I take it he can claim the 20% tax relief from the 40% tax rate he has paid.
Sorry been searching the internet for an answer and going round in circles.
Thank you in advance.
-- Edited by lor on Wednesday 4th of January 2012 01:00:32 PM
It sounds like you've already read the link below but it also sounds like an occupational scheme, not a private one. The tax relief has been dealt with at source.
I quote from the core return helpshieet page 17 :-
Payments deducted from your pay before it is taxed (the net pay arrangement) If your payments to your employers occupational pension scheme (or any associated Additional Voluntary Contributions) are deducted from your pay before it is taxed you will already have received your tax relief. Putnothing on this tax return.
Just to move this problem forward, can you let us have the figures from the pension statement and is it possible to contact the pension provider?
ok so it sounds as though he has already had his relief, and even though he is a 40% tax payer that's doesn't make a different to his relief, he still gets the same as everyone else.
The basic rate band would be extended by his contributions (within annual limits). I could probably check that this has happend with the pay, tax and pension figures; annonymously supplied, of course. Then you'd know if you need to enter them on the SA.
1) client is adamant that it is a personal pension
2) he has emailed me the following
I think there is a difference between occupation and personal pension plans. Mine is a personal pension. I know that only 20% tax relief is claimed from my pension statements. Could you please look into this further and grateful if you could let me know the correct position. What I would like to know that it is correct to claim relief at the extra 20% on £2k (pension) payments. Given what I have read I think I can do this.
as follows:
Personal pensions You pay Income Tax on your earnings before any pension contribution, but the pension provider claims tax back from the government at the basic rate of 20 per cent. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you pay tax at higher rate, you can claim the difference through your tax return or by telephoning or writing to HMRC. If you're an additional rate taxpayer you'll have to claim the difference through your tax return.
I am having problems getting my head round above is it saying that he will have either the 20% added back by the pension provider or if not then claim via tax return or call hmrc, or is it saying you do both.
I think it is saying you have to either have the 20% relief provided by the pension provider, or if not then through your tax return.
Sorry if I sound stupid but haven't dealt with this before.
-- Edited by lor on Friday 6th of January 2012 07:45:29 PM
I was loathe to just point you to box 1 on page 4 of the core SA return but if you enter the contributions £2,000 + tax £400 = £2,400 then that should increase the basic rate band to £39,800
On a salary of £53,500 less basic rate band of £39,800 = £13,700 taxable @ 40% = £5,480
* Therefore £400 has been added to contributions and a further band of tax has been paid at 20% instead of 40%.
best wishes, Tim
* Edit.
-- Edited by Don Tax on Saturday 7th of January 2012 10:02:06 AM
You might ask why isn't all of the relief given one way or the other -- either a tax free allowance or addition to pension pot.
I have heard it said that the pension companies don't welcome being involved in PAYE and have clout enough with government to have likely lobbied only to be involved in run of the mill, basic rate relief. If memory serves, this 'At Source' arrangement is a fairly new one - 10 years or so.
IMO There are pro's and con's with this. Basic rate taxpayers need not do anything to obtain relief. I've no doubt that prior to this many BR taxpayers forgot to claim it, because they didn't automatically receive a tax return or forgot to enter some or all contributions.
In the past all the relief was given in the form of a tax-free allowance, thus significantly reducing the bi-annual tax bills of clients such as yours. Nowadays I hardly ever encourage client's to make contributions whereas, in the past, if there was any spare cash, I always did. This pattern will be repeated many thousands of times across the country, and I think saving for retirement has been quite severely curtailed as a result.
20 years or more ago........... (Errr thats enough Ed).
read again, makes sense. I am going to amend the return this week.
My business is very busy at the moment, have quite a few clients now. Hope everyone elses businesses are growing also. I am hoping to be just doing this soon and leave my full time job as doing both is becoming too much.
