Pension savings charges

Little help on this pensions savings charge calculation

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Picked up a tax return client recently and although the sources of income are the usual, the numbers are a bit larger then normal.  I was hoping someone might confirm my thinking re: the pension savings charge.

Client has net employment income of c,£600K and has paid £40,968 net into a registered occupational pension scheme.  The basic rate band will be extended by the £51,210 gross contribution.  The annual contribution allowance will taper down to £10K based on earnings.

So the charge on the pension savings will be £13,935 ((net contribution £40,968 less £10K allowance) x 45%) less £10,241 basic rate tax treated as paid, £3,694?

Any input much appreciated.  Thanks in advance.

Replies (3)

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By jcace
10th Dec 2019 17:05

My understanding is that the charge is calculated on the total excess amount, including tax relief and any employer contributions. In your example this would be £41,210 at 45%, but you also need to include any employer contributions. If the contributions are all into one scheme, the scheme itself may be required to pay some of the charge.

Thanks (1)
By John R
10th Dec 2019 17:16

I agree with jcace but is there any unused relief from the previous three years? To qualify for unused relief, the individual has to have been a member of a pension scheme in the relevant earlier year.

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Replying to John R:
By Timothy
10th Dec 2019 17:35

Thanks both. I have asked if the previous 3 years relief was used and client is checking with his Wealth Manager (wife?).
Having said that the client has filed his own SA100s previously, so if he doesn't know about his earlier year contributions without asking I suspect there's a reasonable chance there will have been error back then. Thanks again, very helpful and much appreciated.

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