Higher rate tax relief on one-off pension contributions

Hello, I wrote to HMRC back in March and then again in June to claim back additional higher rate tax relief on some one-off pension contributions I made into my company pension scheme. I could see the letter was received via the HMRC app which is very useful, however, I didn't receive a response apart from an update of "Done" on the app form tracker. I can see that my tax code (tax-free amount) has since changed and gone up but was interested to know if there is a default way of HMRC paying back higher rate tax relief as I thought this might be a cheque or back transfer? It doesn't really matter which, just interested to understand the process better for future reference. What is confusing is that I put in two different claims. After the first claim totalling £2k of one off contributions, my tax code changed and after the second more substantial claim of £8.8k I received an updated tax code where my tax code amount went down rather than up. I was expecting a rebate of £2,160 in total for these two claims based on 20% higher rate tax relief. The additional tax relief falls short of this based on the remaining tax year if indeed this is being refunded via tax code allowance change. Lastly, I hadn't notified HMRC of increases to my salary as well as pension contribution for circa 4 years as I'm a higher rate tax payer so I was expecting a rebate for this too but again wasn't sure if the default is via tax code change, cheque or bank transfer? I have tried to phone up but appreciate you are very busy and the lines always have a long wait time. Many thanks

Hi,

When you submit a claim for tax relief on pension contributions, we would update the record and a tax calculation would be issued for any previous tax years if there was any underpayment or overpayment of tax.

The figures you declare would be used as an estimate going forward and you would receive an amended tax code for the current year to try and give you the tax relief going forward. If you are unsure over the amount that would be due back you can contact our Income Tax team and we can advise how it has been calculated.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Thnak you.

I’ve had a similar issue, I pay pension contributions after tax and the pension company applies 20% tax to the payment. I am a higher (40%) tax payer so I wrote to HMRC and got no response, I then filled in the note/comment on the two affected tax years on the gateway and these were “completed” by HMRC but no response or payment given I’ve tried phoning and given up as you get cut off before actually speaking to anyone so I also wrote again in August and still no response. It’s very poor and I was wanting to make additional payments to my pension but won’t if getting the tax back is this difficult. Is my next step an official complaint?

Hi
I apologise if you haven't had a response.
You should always get a calculation or a letter advising of the updated position.
You will need to contact our Income Tax department again to confirm if it has been actioned:
Income Tax: general enquiries

hi, can someone please explain the 40% higher rate tax relief for person 'relief at source pensions'. The math does not seem to work out. 1)if i am a 20% basic rate tax payer, if i earn £10000, 20% is taxed and i end up with £8000. if i place the £8000 into my personal pension the pension provider will automatically apply the 20% tax rate. (in fact they will apply 25%, following the removal of the 20% via tax to £8000 to get back to £10000 this means 8000x1.25 =10000) all of this is working correctly. 2) if i am a 40% higher rate tax payer, if i earn £10000, 40% is taxed and i end up with £6000. if i place the £6000 into my personal pension the pension provide will again automatically apply the 20% tax rate. (again this will in fact be 25%, thus £6000 x 1.25 = £7500 will now be in my personal pension.) although i now need to claim the additional 20% back from HMRC via self assessment form, following HMRC guidance as shown in SA100 guidance document : ''Emma paid £700 into her pension scheme. She puts £875 in box 1 (£700 divided by 80 and multiplied by 100), which is her net payment plus the tax relief of £175 (£875 at 20%).'' this means i enter £7500 into box 1 on the self assessment form (£6000 divided by 80 and multiplied by 100) = £7500. HMRC now adjust my basic rate threshold from £50270 + £7500 = £57770. meaning i now only pay 20% on the £7500 when i should have paid 40% saving me 20% of £7500 = £1500. This means following placing £6000 into my pension, I've only received back £3000 (£1500 from the pension provider and £1500 from HMRC) where is the missing 10% from all contributions? Can anyone mathematically explain where the missing £1000 (i.e. 10% of all contributions is)? any answer would be very much appreciated

Hi Mart.07

In your example you are paying £6000 into your pension. As long as your income above the higher rate tax threshold covers the £6000 you can claim relief on the full  contributions.
The pension provider will claim 20% relief giving the figure £6000 x100/80 = £7500. £7500 at 20% £1500.
As you are higher rate an additional 20% would be due. As you are in Self Assessment your basic rate tax band is increased by 7500 to give you the additional 20% relief £1500.
More information can be found online Tax on your private pension contributions

Thank you

I don't think the above response addresses the question posed by the other user but I think I know where that £1,000 has gone. The £7,500 * 20% higher rate tax relief i.e. £1,500 is being paid back as cash so effectively is "income" as it does not get put into the pension. Therefore you effectively end up paying the 40% higher rate tax on it i.e. the difference between £10,000 and £7,500 so £2,500 * 40% = £1,000 tax leaving you with £1,500 as cash.

Also confused by this. I submitted my reclaim last year and I'll round the numbers to match the example. I made contributions out of my after tax salary of £6,000. My pension provider topped this up by £1,500. So I submitted a figure of "total pension contributions (including basic rate tax relief)" of £7,500 to HMRC. They then adjusted my 22/23 tax calculation by reducing my 40% tax bill by £7,500*1.25 = £9,375 and adding it to my 20% bill. Therefore a saving of £1,875. So in summary, for my £10k earned, £7.5k has gone into my pension and I've paid £2,125 in tax (£4k - £1,875). I could then add this £1,875 rebate to my pension and £2,343.75 (x1.25) will be added, leaving me £156.25 short of the original £10k.I guess I then tell HMRC that my pension contributions are now £9,843.75 (ignore that it's a different tax year), they recalculate and I get another small rebate, I top up my pension again, etc etc...

Hi peekay, I suspect the part 7500 * 1.25 is wrong As per HMRC admin’s reply above It should be 7500 * 1.2 So you get 1500 additional tax relief Then if you put such tax savings into pension You get 375 basic relief so 1875 added to the pot. And then you can claim 1875 * 0.2 = 375 additional tax relief So let’s do it again and again and we sum the pension addition (your input and 20% basic) each time 7500 + 1875 + … = 7500 / (1-0.25) = 10000 Which is the desired result. I understand you have it as first hand experience for 22/23 but given you did some rounding to fit the initial example so I wonder if there is any “loss in translation”

Hi bwearryyu, No loss in translation, same calculation for last 4 tax years. My contributions (inc. provider top up) *1.25. Put another way, the pension provider grosses up the £6000 so £6000/(1 - 0.20) = £7,500, then in turn HMRC are grossing up the £7,500 so £7,500/(1 - 0.20) = £9,375. Essentially you have to be proactive. Put £8,000 into your pension (so a voluntary top up of £2,000 aside from your £6k salary contributions, which you might not have until your rebate many months later...). This becomes desired £10,000 after provider top up. Then £12,500 will moved to basic rate tax calculation leading to a £2,500 rebate. This relies on you actually having more than the hypothetical £10k but we're assuming that as 40% tax payers but you end with £1,375 less in your pocket but £2,500 more in your pension.

If you get taxed on 10k, and now you want to get the tax back by investing in a pension, it is clear that you have to invest 10k in a pension, not the left-over from 10k after tax.

Apologies: my above comment is obviously wrong. I have asked for it to be deleted; in the meantime, please ignore.

Hi Officier, If  I submit self assessment for 2023/24 in gov.uk, will it automatically derive higher rate tax relief on one-off pension contributions? I guesss the system only applied default basic 20% tax relief for one time pension contriubtion. If no, what is the procedure before or after completing self assessment in coming months? In current tax year (23/24), my total income is over 100k pound, tax code is 702T and I 've posted additional 6000 pound to my private pension account before 29 March 2024. I guess I am qualified to apply second tax relief. Right?

Hi ukceciltse1971 Sungu

Yes as you are a higher rate tax payer then you can claim the additional tax releif on your pension contributions if paid from your net income. You would declare the details on your Self Assessment tax return to receive the tax relief. 

Thank you

thanks admin 5. I will try to declare the self assessment tax return in gov.uk ! appreciate for your feedback. I will update the status soon.

Hello, how can I do a back claim on tax relief on pension contributions for previous years ?

Hi Nicole Marie-Joseph

If you are in Self Assessment then you would need to amend your tax return Self Assessment tax returns .
If you are not in Self Assessment you can contact HMRC with the pension details to review Income Tax: general enquiries.
Depending on the amount of the pension contributions you may may need to submit the claim in writing 

Thank you

Hi, I have made a £10k lump sum contribution to my personal work based pension. I have a letter from the pension administrator who have confirmed receipt and they have not applied any tax relief. I assume I need to write to HMRC directly to get the full tax relief up to 45%?

Hi
Yes you will need to write to HMRC with the details. You will need to include evidence from the pension provider of the payments made. Confirmation if the payments are gross before tax or net after tax. The address is
HMRC,
Self Assessment & PAYE,
BX9 1AS
UK

Hi. Exceptionally (inadvertently), I was paid 2 years bonus during TY 23-24 and my company diverted 180000 gross to my workplace pension fund (operated by NEST) which has been running for >4 years. My normal net contributions (personal and employer) are paid in with the standard 20% tax relief applied and I have previously claimed by my higher rate charge. My annual salary has grown to £144k over the past 5 years. I am aware that I exceeded my annual allowance for TY 23-24 and wish to carry forward unused allowance from the previous 3 years but not sure how to declare any remaining taxable amount in my self-assessment noting that the exceptional amount was paid in gross and not net! Please advise