Higher rate pension relief

Higher rate pension relief

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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)

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By Tim Vane
20th Jan 2016 11:31

Why would you want to rely on coding notices for anything? Surely he has a statement of his contributions?

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By cruz
20th Jan 2016 11:33

has been requested

and info is outstanding to date.  I was trying to take a march on what i thought would be a simple return to tick off the list.

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By Kevin Kavanagh
20th Jan 2016 11:33

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.

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By cruz
20th Jan 2016 11:39

Thanks

but i dont believe there is any salary scarifce but just a standard contribution to scheme.  Client recieved a large bonus in the year taking them over £100k hence the need for tax return.  When asking quesitons of them i feel they are like a rabbit in the headlights and instead of gathering facts, say things which only confuses me.

difference on treatments results in a very smal reayment of a £1k liability hence why i want to be sure as i can.

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By I'm Chuck Bass
20th Jan 2016 11:41

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?

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By SteveHa
20th Jan 2016 11:46

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.

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Replying to Hazel Accounts:
Portia profile image
By Portia Nina Levin
20th Jan 2016 11:50

Are you sure?

SteLacca wrote:

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?

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Replying to Vallery Lee:
By SteveHa
20th Jan 2016 12:10

Then it depends

Portia Nina Levin wrote:

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.

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By cruz
20th Jan 2016 12:17

thanks everyone

From P60 and final payslip of the year i can see everything has been taxed i.e. gross and the pension contribution is deducted by the employer from the net proceeds.

My process was to gross up the net contributions and make the claim in linewth SteLacca first response and i did remember he PA calculation and subsequent reduction but thanks for the reminder. 

Portia Nina levin - Gross pay is over £100k then adding benefits he is refirmly over.  The contributions have been made from net pay so i am unsure on your take on this, can you provide me with your thinking please? Thanks

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By Portia Nina Levin
20th Jan 2016 12:28

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.

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By cruz
20th Jan 2016 13:16

noted

Thanks for clarifying your comments Portia Nina Levin, as previously stated i was and am fully aware of the PA adjustment but in all honesty have never come across the situation of an adjusted net income being below £100k despite employment earnings being in excess.  Sheltered life perhaps but appreciate your highlighting the possibility.

Your statement "none of this is really rocket science" is offensive and would highlight posting is optional therefore if your preferred topic is rocket science rather than pension contributions then you are not obliged to post.

It is my opinion this board is invaluable to one man/women and their dogs providing a communication medium to fellow professionals when assistance is required.  I do enjoying contributing and receiving much needed assistance but do ge frustrated when one persons query is somewhat laughed at.  I just could be the case i hold knowledge which appears simple to me but you in fact dont know however wouldnt like to think i would highlight this as every question (including rocket science) is simple IF you know the answer.

Once again sincere thanks to all ( including yoursef PNL) for everyones time and comments on this topic.

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By Tim Vane
21st Jan 2016 11:56

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.

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