Tax code - personal pension relief

Tax code - personal pension relief

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I am completing a tax return for a client who has made pension contributions to his employer scheme during the year 2012-13.

Client's tax free allowance has been increased by £2000 by HMRC for 2012-13 to reflect personal pension contributions.  

Client has provided me with a P60 and schedule from pension provider, which indicates that payments were made to an employer pension scheme via a salary sacrifice arrangement, i.e. the contibutions were made before tax was deducted.

My query is - by making the contributions via salary sacrifice, no tax relief is due as this income has not ever been taxed in the first place?  And therefore the personal pension adjustment to the tax code is not required?

Apologies if this is a question with a very obvious answer (or if I am completely barking up the wrong tree) but the change in tax code and the type of contributions being made just don't seem to correlate.

Any advice would be much appreciated.

Replies (3)

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By User deleted
11th Sep 2013 08:01

You are correct

Salary sacrifices usually result in the contributions being employer contributions - so no adjustment to PAYE code. When was the sacrifice put in place? If it happened within the last year or so it could be that HMRC simply aren't aware that employee contributions have ceased.

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By Euan MacLennan
11th Sep 2013 10:05

Salary sacrifices

I agree with BKD.

I would just add that there is often muddled thinking about salary sacrifices.  They are just that - no more and no less than a voluntary reduction of the agreed salary for a job.  They are not payments for pension contributions (or childcare or any other benefit) as such.  However, an employee would only sacrifice salary in exchange for the employer providing the employee with a (tax-free) benefit.  So, any salary sacrifice implies that the employer is paying for a benefit - in this case, employer pension contributions.

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By julian.sims
11th Sep 2013 14:21

Risk of error

The risk of this type of case is that someone still completes their Tax Return showing the pension contributions (although they are now Employer contributions).  HMRC would have then have no reason not to include these in the PAYE code until they enquire into the Return.

I trust that this is just as timing issue that HMRC, being unaware of the change, are still coding the old adjustment.  If not, an amendment is needed to the Return which incorrectly showed the Er contributions.

 

 

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