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Posted Thu, 13 Jan 2022 02:15:51 GMT by raoul
I'm confused about tax relief on pension contributions. I pay into an employers pension scheme, which reclaims at the 20% rate, but I am in the 40% tax bracket. As the instructions suggest, I'm entering the amount of my contributions + the amount reclaimed by the scheme into the box labelled "Payments to registered pension schemes (Also known as PPR) where basic rate tax relief will be claimed by your pension provider (called Relief at source). Enter the payments and basic rate tax:" in the section "Paying into registered pension schemes and overseas pension schemes", but the results seem strange. Taking some convenient numbers, imagine my contribution before relief was 600. The pre-tax earnings would be 600/0.6 = 1000. The 20% tax relief claimed by the scheme would be 150 (for a total contribution of 750 = 600/0.8 - and the pension scheme does indeed claim back my contribution / 0.8). I tried entering 750 into the "Payments to registered pension schemes ..." box and viewed the tax calculation, expecting it to say that I am due 250 back (1000 - 750). Instead it says that my "basic rate limit has been increased by £750.00", which results in 750*0.2 = 150 due back. Could someone explain what I'm missing? Have I entered the wrong number, or used the wrong field?
Posted Thu, 13 Jan 2022 13:02:09 GMT by raoul
After clicking submit I realised the answer to my own question. The remaining 250 was NOT used as a pension contribution and therefore 40% tax (100 GBP) is due on it. 250 - 100 = 150 due back. Sorry for the unnecessary question.
Posted Fri, 14 Jan 2022 16:10:16 GMT by HMRC Admin 20
Hi raoul,

If you search online for Personal Tax Relief calculator, you will find free tools that break it down clearly.

Thank you.

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