Excess pension payment confusion

Hi, I am very confused by all the information I have found on this and other sites, the answers are very contradictory. Given the situation where there has been paid contributions into a pension that are in excess of an annual salary of say, £27500 by £250 i.e. a total of £27750 which includes tax relief, company contributions etc but they have unused allowances from previous years, do they have to pay a tax charge on the overpayment or complete a self assesment tax return. Having used your annual allowance tax charge calculator it tells me the answer is no, I don't have a tax charge to pay as I have substantial unused allowances from the previous years, this makes no reference to salaries. Also if in the situation above if I don't actually receive the tax relief from say a £2000 contribution I made in March until after the new tax year begins can it still be taken as I have paid an excess amount into my pension as the tax relief of £500 is not being received until the following tax year, which would actually decrease the contributions made in the tax year by £500 making the total contributions received into the scheme during the relevant tax year as £27250, which is £250 less than the total income of £27500. Could someone enlighten me?

I think I can help - I've read the relevant rules far too much trying to deal with my own and my family's tax affairs... The Annual Allowance is a common kind of pensions limit people run into, so it's what a lot of the information that is readily findable is talking about - but it's not the one that might apply to your case. (The Annual Allowance is currently £60000 unless reduced due to much higher income, or having already started to take benefits back out of pensions.) The carry-over of unused allowance from previous years, paying tax charges, needing to do so via Self Assessment, and using on online calculator specific to the Annual Allowance are all details relating to the Annual Allowance, and therefore not relevant to your current situation. You mention you are concerned about paying more into your pension than your annual salary - which is indeed another kind of threshold people paying into a pension need to be aware of - it's often referred to using the words "relevant earnings", as is written in the Finance Act 2004 Section 190 as "The maximum amount of relief to which an individual is entitled ... is ... the amount of the individual’s relevant UK earnings which are chargeable to income tax...". I think you might be within the limit, though! You've said total contributions are only slightly over annual salary, and that some of the contributions were employer contributions... importantly, employer contributions do not qualify for tax relief, and your pension scheme will know this and not have claimed relief on the portion declared by your employer as employer contributions. In the example given, this seems likely to bring the portion of contributions on which relief was paid back down within the annual salary, so everything is good. [Citation for contributions paid by employers not being relievable pension contributions: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#relievable] Regarding your final question, about relief arriving in your pension later than the original contribution to which it relates - no, the relief is dealt with as part of the same tax year as the original contribution, even when it takes longer to be retrieved from HMRC. That came up recently in these forums at https://community.hmrc.gov.uk/customerforums/sa/bdde8465-95f4-ef11-a4de-002248c7d37d and other threads.

Hi Max, Thanks for your answer, isn't it true that the total contributions including that of your employer can't exceed relevant earnings, which I guess is 100% of the salary given in the example. So there is still the overpayment which is subject to a tax charge.

I could be wrong, I'm not a professional, but as far as I can see, the rules surrounding this particular limit seem to be phrased in terms of relief obtained, not total contributions. I'm happy to be corrected if you have a citation to the contrary!

Hi Max, This has taken forever to work out but I think the following is correct...feel free to confirm The annual allowance is £60k for 2024/2025, in the scenario above this is not breached therefore no tax charge. In terms of tax relief on relevant earnings, of the total of £27750 contributions, £1250 were from company contributions, there is no tax relief on company contributions. Also £1500 were from employee contributions to a salary sacrifice scheme so as no tax relief is granted on this at source it has the effect of simply removing £1500 off the salary which brings the relevant earnings to £26000. There was a further £20000 contributions which attracted £5000 tax relief paid into a SIPP this total £25k contributions. This essentially is contributions of £25k from £26k of relevant earnings and no liability for paying tax relief back as it has not exceeded the maximum relief allowed in these circumstances.

Hi Bob Ball,
You can pay in more than the £27750 but no relief would be given.
You have an annual allowance of £60k to limit pension contributions and it is the unused amounts from this that can be carried forward.
If you pay in more than the 60k limit you can bring forward the unused relief so that you do not have a charge to pay.
If you don’t have unused relief then yes you need to complete a tax return.
Please see guidance here: 
Working out and paying the annual allowance charge
Thank you. 

@HMRC Admin 25 Your first sentence says "no relief will be given" but I know from personal experience that a pension provider will generally have no knowledge of the member's relevant earnings, instead relying on the member having agreed to not make excess contributions, and so it is very possible relief will be given - even when it is not due and shouldn't be, and needs to be returned. The rest of your reply is about the Annual Allowance, not the relevant earnings test, and thus inapplicable to the situation here.

Hi HMRC Admin 25, I believe the words 'unused relief' in your statement should read 'unused annual allowance' they are not the same thing, You can not carry unused tax relief from one year to another. You can not receive more tax relief than relevant earnings will allow. This goes back to my original statement that the internet is full of contradictory statements and you really have to crawl through the mire to get to what is fact and what is misinformation or misinterpretation. Thanks though 

@Bob Ball: I agree with your maths and logic in your post several above this one. (Your latest post is still concealed pending moderation as I post this.)