Share this content
1
2659

auto-enrolment tax relief

via tax return

Hi
i think this a basic question. Employee director with auto-enrollment pension contributions. i understand that contributions are made to NEST ​  before income tax PAYE deduction and relief at source by HMRC top-up at 20%. Am i right in my thinking that employment income taxed via the directors self-assessment tax return is the whole gross salary including pension contributions (with tax paid effectively back by HMRC to NEST for basic rate taxpayers?) And what is the treatment for higher-rate taxpayers again via tax return? many thanks. 

Replies

Please login or register to join the discussion.

avatar
By daniel_
25th Oct 2018 11:35

I think NEST payments should be entered gross of HMRC top-up on the return TR4 Box1.

The basic rate band will be increased by the same figure to get higher rate tax relief.

Thanks (0)
avatar
By Matrix
25th Oct 2018 11:37

You would put the figures from the P60 and the pension contributions in the relevant sections on the tax return as you would any other employee.

Thanks (0)
avatar
By Maslins
25th Oct 2018 14:01

After pondering a vaguely similar situation for some time, I came to the conclusion it makes sense for all concerned if firms just stick to employer contributions. Employees don't have to contribute at all, there's just a minimum employer amount, and a minimum total amount. If you want the employee to "suffer" some of the pension impact, do salary sacrifice.

Thanks (1)
avatar
to Maslins
25th Oct 2018 14:07

No, employees should be encouraged to contribute to their own retirement fund.

Thanks (0)
avatar
By Maslins
to carnmores
25th Oct 2018 14:17

Ok, then get them to agree a salary sacrifice to get the higher employer contribution levels.

Thanks (0)
By DJKL
25th Oct 2018 14:43

The catch with employee AE contributions is determining the amounts for the tax return.

Tax clients are going to have to either retain all their payslips for the year so that one may sum the amounts or log on to the provider and get a print of their contributions made.

Somewhat unhelpfully the P60 was not adapted to collect the information as an annual total (or cetainly the ones I printed for 2017/2018 using Brightpay do not give the AE or other pension total)

Thanks (0)
avatar
25th Oct 2018 14:53

This is not complicated. The employer can summarise the annual payments to each employee easily. On payroll manager this wouldn't take much time

Thanks (0)
By DJKL
to carnmores
25th Oct 2018 15:20

Can, yes, but will they?

Not every tax return is for someone who controls the business, a fair few mere employees who have other income like rents etc cannot demand their employer obliges.

My point was that with RTI there was a good opportunity to add a few boxes on the P60 to provide information re pension contributions; a lack of foresight springs to mind re HMRC considering RTI and AE together.

Thanks (1)
to DJKL
25th Oct 2018 17:50

I agree. It is really stupid. The same as student loan deductions not going on a P45, and HMRC being very, very unhelpful handing that figure over. And by definition, the person will have left that employment, and so won't be able to log into whatever new bizarre payslip portal that most employers use after GDPR. It's almost like they want to make it as hard as possible to prepare a tax return nowadays.

Thanks (2)
avatar
By Matrix
to kenny achampong
25th Oct 2018 19:17

I agree with the above points. I have to decipher payslips to work out if it was an employee or employer contribution or net or gross. Maybe I will just get clients to go back to their employer for a report from now on since they won't login to their pension system to dig out the amounts for me.

Thanks (2)
avatar
29th Oct 2018 13:47

Auto enrolment would all depend if the director has a contract of employment with the company. If not, then they are classed as a holder and do not qualify for auto enrolment as a worker anyway.

Thanks (0)
avatar
29th Oct 2018 17:54

NEST pension scheme is not within the Net Pay Arrangement (NPA) but within Relief At Source (RAS).

So the taxable income from pay is the original gross pay. However, you can indicate on the tax return the contribution value that is within RAS. Its not obvious but to the question 'Did you make contributions towards a personal pension or retirement annuity?' the answer is yes. Then you will be able to enter the relevant amounts as contributions to a PPR under RAS. The descriptions are confusing but RAS is confusing.

Pension contributions within RAS have no relevance to the employee P60.

Thanks (0)
avatar
to psimonparsons
29th Oct 2018 18:16

In payroll manager if you chose NEST the radio button relief at source is activated

Thanks (1)
Share this content