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Posted Mon, 16 Dec 2024 11:51:55 GMT by Anthony
I make a personal pension contribution with my employer paid by salary sacrifice. This is saving income tax on my payslip at Basic Rate. I also have income from property rental and self employment that takes me over to be a Higher Rate tax payer. Am I not able to claim the additional 20% tax relief as my income all together is in the Higher Rate bracket but I am only getting tax relief on my salary sacrifice at Basic Rate? If so, would I just put this on my Self Assessment like a gross pension payment? Thanks
Posted Mon, 23 Dec 2024 15:23:09 GMT by HMRC Admin 10 Response
Hi
Please declare your gross pension payments in box 1 of page TR4 in your self assessment tax return or online equivalent.  This will extend your basic rate band to reduce the amount of income taxed at 40%, giving your 20% tax relief.
Posted Mon, 23 Dec 2024 18:43:04 GMT by BellaBoo
Hi not HMRC but you would never include salary sacrifice contributions on a self assessment. They count as employer contributions so you cannot claim relief on them. If you earn £45,000 and sacrifice £10,000 then your P60 would show £35,000 income. This is why you cannot claim relief on them. You have already been given full relief via your employer.
Posted Sat, 28 Dec 2024 02:03:45 GMT by Anthony
I don’t think you are correct @BellaBoo To me if I earn 45,000 at my main employment, my salary sacrifice contributions (that are my contributions - not my employers contributions) benefit me at a basic rate. If my colleague earns £55,000, their salary sacrifice contribution benefits them at a higher rate. If I earn £10,000 through self employment and property income, I’m on approx the same salary gross but my pension contributions have only given me relief at basic rate. I will follow the advice of the HMRC admin.
Posted Wed, 08 Jan 2025 14:15:34 GMT by maxb
@Anthony Actually, if you are correctly identifying the contributions as covered by salary sacrifice, then BellaBoo is right and HMRC Admin is wrong. I guess HMRC Admin overlooked the mention of salary sacrifice in your initial comment. The box that HMRC Admin identified is for when you make a personal pension contribution out of income *after* tax, and your pension provided claims 20% tax relief on your behalf. However this is not what happens with salary sacrifice - in this case the sacrifice is deducted before you were ever paid, so you are never taxed (at all) on it, so there is nothing to reclaim. Your employer then makes an employer's pension contribution of the sacrificed amount, in exchange for having paid you less. This is why *all* salary sacrifice contributions are deemed employer's contributions for tax purposes even if they are only happening because you chose for them to happen. In your example of earning £45,000, you said that your salary sacrifice contribution benefits you at the basic rate... True, but not the whole story. It also benefits you by removing your contribution from the basic rate band entirely, making more room within the basic rate band for more of your additional £10,000 other income to fit into basic rate. This is one of the benefits of salary sacrifice - you get all of the benefit up front, meaning there's no need (or entitlement) to claim relief back later.
Posted Wed, 08 Jan 2025 16:52:40 GMT by Clive Smaldon
Not HMRC...Anthony, you and HMRC are incorrect, its salary sacrifice, its already been removed from salary, so youve had the tax relief by it not being taxed, and the contribution itself is then viewed as an employer contribution, if you follow what HMRC admin said you will be submitting an incorrect tax return and claiming releif to which you are not entitled. https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42785 see the last paragraph
Posted Wed, 08 Jan 2025 19:24:19 GMT by BellaBoo
@Anthony Hi, If you check the very last sentence of the following HMRC page you will see it confirms that the contributions are regarded as employer contributions if made under salary sacrifice. There is no box on a self assessment to report salary sacrifice contributions because you have already had full relief for them via the lower figure on the p60. https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42775 In continuation of the scenario you used, your p60 would show taxable earnings of only £35,000 (£45,000 salary less £10,000 salary sacrifice). So once you add on the other income, your total income is only £45,000. While the person earning £55,000 would have £45,000 on their p60 and that would be their taxable income - the exact same amount as yours was.
Posted Fri, 10 Jan 2025 17:03:10 GMT by Clive Smaldon
...just to clarify by reference to your example... Colleague, £55K salary £10k salary scarifice, leaves £45k taxable, relieved the excess over £50270 at HR You, £45k salary, £10k salary scarific £35k taxable, £10k other income, £45k taxable, therefore relieved the excess over £50270 at HR The overall tax due would be identical...and thats why you dont claim salary sacrifice on a tax return, ever.
Posted Mon, 13 Jan 2025 18:58:09 GMT by Anthony
Thanks for your input Clive. Please say if this example works: Colleague, £65k salary, £10k salary sacrifice, leaves £55k taxable, pays the excess over £50270 to £55k at 40% tax but saves paying 40% on the 10k salary sacrifice. Me, £45k salary, £10k salary sacrifice £35k taxable, £20k other income, £55k taxable, pays the excess over £50270 to £55k at 40% tax but hasn't benefited from 40% tax saving on the 10k salary sacrifice (as basic salary is at 20% threshold)
Posted Wed, 29 Jan 2025 19:02:55 GMT by maxb
@Anthony The detail you aren't accounting for in your example, is that since your salary has been reduced by salary sacrifice, more of your basic rate band is left available to apply to your £20k other income. Colleague: £55k taxable salary, £50270 to £55k charged at 40% tax You: (£35k taxable salary plus £20k other income) = £55k total taxable income, £50270 to £55k charged at 40% tax Same position in each case.
Posted Wed, 29 Jan 2025 22:43:00 GMT by BellaBoo
You do benefit from the 40% saving. It might be clearer if you consider what the position would be if you didn't salary sacrifice. You would then have approx. £15,000 taxable at 40%. With the salary sacrifice you end up with only approx. £5,000 taxable at 40%. Saving you 40% on £10,000. In your example you avoid paying 20% (basic rate) on the £10,000 sacrificed but this also allows £10,000 of the other income to be taxed at 20% rather than 40%. Both of those together give you the 40% on the £10,000.
Posted Thu, 30 Jan 2025 21:24:41 GMT by Clive Smaldon
As requested Anthony...It always works, on any figure, at any rate of tax...removing income that would otherwise have been liable to tax from tax altogether saves tax for that individual, no matter how their income sources are split, at their highest rate.

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