Additional Pension Contribution tax relief on gross salary including personal tax allowance

Please could I have clarification on the rules for tax relief on lump sum pension contributions up to 100% of gross salary? In previous years I have made additional pension contributions into my employer's pension scheme (LGPS) by lump sum and I've had the tax relief back as a refund through Self Assessment. I wish to pay nearly all of my gross income for this year into the pension as additional lump sum contributions, including salary that's within my personal income tax allowance, and receiving the relief as a refund through Self Assessment as before. Please could you clarify whether I would receive tax relief as a cash 'refund' on the amount that's within my tax allowance, on which I wouldn't be paying income tax? i.e. would I get more money back than I have paid in tax? (I understand this is the case if it's done through 'relief at source' with the relief being added to the pension; I'd like to understand whether the relief is available through Self Assessment.) I understand from the tax manuals that I can have tax relief on my pension contributions on 100% of my 'Relevant UK earnings' that are 'Chargeable to income tax'. I am confident that my earnings are relevant - I am seeking a clear definition of whether the amount within my tax allowance is both Relevant and Chargeable. For clarity, my salary is below the 60k annual pension allowance, and I'm a 20% tax payer. Many thanks

Hi

The maximum an individual can pay into a pensions scheme, so that their payments qualify for tax relief is either lower of the sum of their employment, self employent and partnership income or £60000 in 23/24.  
The threshold was £40000 in 22/23 and earlier.  Any payments that exceed this threshold do not qualify for tax relief and should be declared in a self assessment tax return.  
Any surplus of the individual's unused annual allowance, can be added to the later year.  Have a look at Check if you have unused annual allowances on your pension savings for more information.

Thank you

Thank you for the response. Unfortunately it does not answer my question at all. My query isn’t about the annual pension allowance, or about the maximum that can be paid into a pension. My question is: will I get tax relief as a refund via self assessment on ALL my pension contributions if those contributions exceed the amount of income I have paid tax on, ie the amount I pay into my pension is my full salary (which is less than 60k) INCLUDING the part I haven’t paid tax on as it’s within my personal income tax allowance? Many thanks

Hi,

The pension threshold is the lower of £60000 or your annual employment income. Any pension payment that exceeds the threshold does not qualify for tax relief.

If you are a basic rate taxpayer, your pension provider will claim basic rate tax from HMRC and add this to your pension. No further relief would be due.  

If you pay tax at the higher or additional rate, then you declare your gross pension payment in your tax return, so that you can claim additional relief due. fI this results in an overpayment of tax, a refund will be made through Self Assessment.

Thank you.

Thank you I don’t think my question can be clear. I’ll spell it out with an example: My employer takes pension contributions of 6.5% of my salary (and claims tax relief and adds it to my pension). I am also making _additional_ contributions - and this is what my question is about. Let’s say I earn £45,000, so I’m a basic rate tax payer, so the higher income tax rate is not relevant. If I pay an additional £40,000 into my pension, this will leave me with an income that’s lower than the income tax allowance threshold. Through Self Assessment I will receive a tax refund - will this be: a) 20% of (gross income - tax allowance of £12,570), so about £5,500, ie the same amount of tax as I’ve paid, or b) 20% of the entire additional pension contribution £8,000 but only if, after calculating a) above, I have allowance from the previous years, or c) 20% of the entire additional pension contribution, £8,000, receiving more tax back than I’ve paid, or d) something else? Many thanks

Hi Dee,
You can get tax relief on private pension contributions worth up to 100% of your annual earnings.
You cannot receive a refund of tax in a year that is of a higher value than the amount of tax you have actually paid in that year.
If you’re paying in an amount greater than £10,000, you’ll need to contact HMRC to claim the tax relief. 
Thank you. 

Thank you To clarify: “You can get tax relief on private pension contributions worth up to 100% of your annual earnings.” Given the second line of this responses, is this in reality always going to be ‘annual earnings minus tax allowance’, rather than 100% of earnings? So for anyone who has a tax allowance it’s never actually going to be 100%? To clarify the second line: “You cannot receive a refund of tax in a year that is of a higher value than the amount of tax you have actually paid in that year.” This seems to contradict a previous response above “The maximum an individual can pay into a pensions scheme, so that their payments qualify for tax relief is either lower of the sum of their employment…” - this suggest it would all qualify for tax relief. What about if I’m carrying forward unused allowance from previous years? Should this statement be “You cannot receive a refund of tax in a 3 year period that is of a higher value than the amount of tax you have actually paid…”? Thank you

Hi Dee,
The maximum tax relief we will give to members of registered pension schemes is up to 100% of their annual earnings. You can get more infromation at Pension schemes. For a repayment we can only repay the tax paid in the tax year. 
Thank you.
 

Hi I have a similar scenario to the above, but don't understand the response given. If you can only refund all the tax paid in the year the contribution was made in and this tax is insufficient (due to tax not having been paid on the Personal Tax Allowance) then the tax refund can never be up to 100% of the annual earnings given that everyone receives a Personal Tax Allowance. Given that people with no earnings are able to claim back a limited amount of tax on their pension contributions it is also the case that HMRC do repay tax in excess of that actually paid in the year. I have been unable to find any legislation which states that the amount of tax reclaimable on lump sum pension contributions is limited to the amount of tax that the individual has paid in the tax year. There is, however, guidance on the Moneyhelper.Org Website (provided by Government's Money and Pensions Service) that states "Firstly, any contributions made by you or someone else on your behalf must be equal to or less than your relevant UK earnings for the tax year in which they are made. For example, if you earn £20,000 but put £25,000 into your pension pot (perhaps by topping up earnings with some savings) – you’ll only be entitled to tax relief on £20,000." As such this example indicates that Tax Relief is payable on a Pensions Contribution of £20,00 as long as an individuals earnings are £20,000 and makes no mention that the Tax Relief is limited to the amount of income tax the individual has paid in the year. Therefore, if the answer is that only tax paid, in the tax year the pension contribution was made in, can be refunded please state where this is detailed in the tax regulations? In addition if this is the case then please contact the Money and Pensions Service and advise them that they have provided incorrect advice to British citizens. If on the other hand, the tax refund can be in excess of tax paid in the year, as per the advice from the Money and Pensions Service, please advise the process for claiming this tax back?

Hi ,
 

HMRC can only provide guidance from their own website/manuals and this is at: Tax on your private pension contributions  . We cannot comment on what information other sites provide . Thank you .