I feel this is simple but client question resulted in self doubt plus usual lack of info.
New client approach and engaged, awaiting agent approval.
Client is £100k plus earner, all employment income and makes contributions to employers personsal pension plan. P60 Gross matches that on last payslip so i am happy pension contribution is made after tax deduction.
Where my doubt arises is around the pension tax relief given they ae 40% tax payer.
Client cannot provide coding notices but said had around 6 in the tax year 2014/15. He recalls a coding notice relief relating to pension contributions, thus increasing his personal allowance. I am awaiting them providing coding notice as proof of staement or the agent approval but should i claim relief via tax return? when i suggested this to the client they claimed at releif already provided by HMRC and in all honesty i am confusing myself and going round and round in circles.
agreed its the simpiest question of the day but pressure of january workload has got me in spin so some clear thinking from another would be most welcome.
Replies (12)
Please login or register to join the discussion.
Why would you want to rely on coding notices for anything? Surely he has a statement of his contributions?
From what you say it looks like your client is making contributions via a salary sacrifice scheme. If that's correct he's already receiving full tax relief through PAYE and no amount should go into his personal tax return.
Or could it be he informed HMRC of his intentions to make such contributions and wanted tax relief sooner rather than later ie though his monthly salary rather than as a lump sum after submission of his return?
You should be able to determine whether the pension was deducted from gross or net from the payslip. If it's a deduction from net then claim on the SATR. If it's a deduction from gross then don't.
NB. If he's gone over £100k don't forget that his PA will be eroded.
Are you sure?
NB. If he's gone over £100k don't forget that his PA will be eroded.
Is your answer the same if the pension contributions have been deducted from the net pay?
Then it depends
Is your answer the same if the pension contributions have been deducted from the net pay?
Then it depends on how far over £100k and how much the pension contributions are. If his adjusted pay is still over £100k, then yes.
The point is that the PA is reduced by £1 for every £2 by which an individual's adjusted net income exceeds £100,000.
An individual's adjusted net income is essentially there taxable income less grossed up pension contributions and gift aid payments.
You may have an adjusted net income that is less than £100,000, because of the pension contributions, despite the earnings from the employment exceeding £100,000.
None of this is really rocket science.
If you've never come across the situation before, you need to ask yourself if you are missing out on tax advice and planning for your clients that you really ought to be considering. Using pension contributions intelligently is surely one of the tools that you have in your armoury for clients who are over the 100K income threshold. You are presumably charging clients for such expertise but seem to lack key knowledge to advise them properly.