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Excess pension contributions

Excess pension contributions

Client has made pension contributions to several pension plans. These payments are "net" ie the provider recovers tax relief at basic rate. In total, when grossed up, these exceed annual earnings. Can HMRC seek to recover relief granted to the provider when we declare these on the tax return (which I believe we still have to do even though there is no higher rate tax to recover)?


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10th Aug 2009 12:46

I have a client with the same problem - only the net paid exceeds income. Was a higher rate tax payer in previous years.
Help, advice, guidance... would be much appreciated

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10th Aug 2009 13:05

I thought...
That the pension companies repaid the excess.

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10th Aug 2009 14:06

Thanks. Sir Les. Yes, I guess they probably do, particularly as my (approved) SA software doesn't make any change to the liability when I add the excess contributions. Though I wonder how HMRC manage it as several different pension plan providers are involved - eg which one do they take it from!

Anyhow I'm alerting the IFA who set it up - not for me to say, but if he'd spread the contributions over two years then client might have been better off (but I'm sure he knows best. . .)

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By ACDWebb
10th Aug 2009 14:28

Since A day
The limit on relief is earnings or the annual allowance charge.

If the contribution is less than the annual allowance but more than earnings then the excess does not qualify for relief and the provider would have to refund the BR tax deducted.

An excess over the annual allowance is taxable on the member at 40%

Relief is only available up to earnings

If the policy is written to allow repayments then application can be made to the provider to repay the excess within 6 years.

So the first port of call is probably the policies to see if any allow refund and then apply to the provider for refund of the excess

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10th Aug 2009 15:56

Yes, the position is more than earnings but less than annual allowance. I'm just wondering how the providers (there were three) know that the aggregate total exceeds earnings (none of them did individually) and which of them has to do the refund (split pro rata?). As I said previously, my view is that the IFA who handles clients affairs must sort this, now I've alerted him. Of couse the SA return I submit may prompt action from HMRC, though in theory I guess the plan providers returns will be aggregated by NI number by HMRC and thus identify the over claim. that way.

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26th Feb 2013 04:25

Excess pension contribution
The tax rate of the annual allowance charge depends on any other taxable income you have. The amount of your pension savings that exceeds your allowance is added to any other taxable income for that tax year. After your allowable expenses and any tax-free allowances have been taken into account, the amount of tax you pay is calculated using different tax rates and a series of tax bands.

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