Thanks for your video. There's a subtlety here that raises a question, which could have a very big impact on how much of a pot you could build up. It seems obvious to me that 1) The tax relief you get back at the 40% can be reinvested the following year and relief claimed ON THAT, since HMRC adjusts your tax rate or gives you a rebate, so that's cash in your pocket and you can do whatever you want with it. Reinvesting such a large "effective rate of return" can produce massive results, up to the annual limits of course. But, 2) The relief you get at the 20% rate cannot be reinvested/reclaimed in this way, since the pension provider just adds it to your pension without your involvement, therefore the tax reliefs at the 20% and 40% cannot be treated in the same way. So either my assumption about 1) is incorrect, so that you cannot claim relief on pension investments which originated from cash claimed from tax relief, but that seems unlikely because it is just cash in my bank account, or assumption about 2) is incorrect, so that the relief automatically added at the 20% rate does in fact count as a pension contribution in of itself which you can further claim tax relief on. As absurd as the latter may sound, some of the information I've read says that a SIPP pension provider adds in the 20% as cash, which you can then presumably reinvest into an investment fund. Does that reinvestment count as a pension contribution which you can claim tax relief on? If not, then why can you do this with your 40% relief?
Really helpful, thank you. One question I do have, however, is can you only claim the higher tax relief on your personal contributions and not your employee contributions too? Or can you claim on both? E.g. if I contribute 8% and my employer contributes 3%, can I claim on 11%?
Really informative video, thanks. Quick question : What happens if you do not earn enough to take advantage of the tax relief applied for the next financial year. I. E the basic rate threshold has been increased to £70k to account for your contributions, but you only earn £60k that year. Do you lose the remaining relief, or is it carried over to the following year?
Hi Josh Thank you for the kind words, I am glad you thought it was informative. Excellent question, if this occurs then you have essentially paid too much tax and you should be entitled to a tax rebate, which comes in the form of a cheque (from HMRC) which you simply deposit. Its best to speak with HMRC directly when this happens and they can best advise on timelines for your situation. I hope this clears things up.
Congratulations. Fantastic video. Very helpful. I still have a question. You explained that for peopled on the 40% tax band, the extra 20% needs to be claimed. Once claimed, on the following year the Basic tax band increases accordingly allowing you to recover that extra 20% but... what happens if you take a paycut or somehow you cannot take full advantage of that increase of the band? Can i effectively end up losing some or all of this tax relief? Can it be carried forward to a future year so that there is no loss?
Hi MrLacos, Thank you for the kind words and I am pleased to hear you found the video helpful. Excellent question, if this occurs then you have essentially paid too much tax and you should be entitled to a tax rebate, which comes in the form of a cheque (from HMRC) which you simply deposit. Its best to speak with HMRC directly when this happens and they can best advise on timelines for your situation. I hope this clears things up.
Thanks so much for sharing this - so useful! One question I have, if I want to claim for previous years I'm guessing I should not do that on this year's self assessment. Is the only way then to call or write to HMRC?
Hi Matthew, So to claim on the backdated tax relief, HMRC confirmed to me that you actually need to send them a letter and that it is not possible to claim on backdated payments through Tax Returns or by Phone. I have list their address below and see the points below of what you will need to include in the letter: Please include: National Insurance Number Full Name Address The tax years that you would like to claim for (the furthest you can go back is 4 years so that is 17/18 currently) For each Tax Year, you need to state your Gross Contribution Amount for that year If you are still unsure, you can send through any supporting documents and HMRC can solve it through there. It does take a couple of weeks to process, and they are likely send you a cheque through the post so you can deposit straight to your back account. The operator did say you may get an email to claim online but she was unsure. Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options, *Address: PAYE SA HMRC BX9 1AS*
Brilliant video, thank you, I also was not aware of this and I have just completed my 21-22 tax return and entered the pension contribution value, it all makes sense in the final calculation 🙂 however is there any way of claiming for the year 20-21 on this years tax return? Many thanks
Hi James, Thank you for the kind words, I am glad you found this video helpful. Apologies for the delay in my response, but to claim on the backdated tax relief, HMRC confirmed to me, that you actually need to send them a letter. And that it is not possible to claim on backdated payments through Tax Returns or by Phone. I have listed their address below along with a list of that you will need to include in the letter. Please include: National Insurance Number Full Name Address The tax years that you would like to claim for (the furthest you can go back is 4 years) For each Tax Year, you need to state your Gross Contribution Amount for that year If you are unsure on these numbers, you can send through any supporting documents to HMRC. And HMRC can solve it using the documents you provided. It does take a couple of weeks to process, and they are likely going to send you a cheque through the post so you can deposit straight to your back account. When I spoke to HMRC, the operator did say that you may get an email to claim the amount online but they weren't sure. Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options, *Address: PAYE SA HMRC BX9 1AS*
Could you do a video for people with a side hustle? So you are paye (40% tax bracket) and make like 5k in side hustle. How can i put 5k into my pension without a tax bill or at least reduced
Thank you for the video So, in summary, we put the net figure, plus basic rate tax relief in the box. The additional 20% for the higher rate tax payers comes by way of increase to the basic rate threshold in the following tax year (so for 2021/22 filing, the basic rate threshold for 2022/23 is increased)? It does seem strange that we pay HMRC just after the tax year to then get the same amount back over 12 months...
If your referring to when to contact them to make a claim on extra tax relief. This should be after the tax year has passed. If your claiming it through your self-assessment tax returns, then you need to do it before their deadlines too. www.gov.uk/self-assessment-tax-returns/deadlines
Thanks for the information. what happens if you are both employed and self employed. For example you make 45K per year through employment and 10K extra as self employed. I am already enrolled in NHS pension but I do extra work privately and want to contribute 5k extra to a SIPP. how would tax reliefe work in this situation?
Ask the people who run your NHS payroll, but I feel pretty confident that you would have got all of the tax relief via your payroll. Presumably, the SIPP payment is in connection with your self-employed income? As that payment is from income not yet taxed (unlike your NHS salary), then your self-employed income becomes just £5,000 subject to tax, ie £10,000 minus £5,000 pension contribution. Next, that £5,000 gets added to your NHS income minus the grossed up contribution paid on your NHS salary. Therefore, depending on what the total is of your NHS pension contributions, you look like you may not be a 40% taxpayer! Why? Your taxable salary (after pension contributions) plus the £5,000 from your self-employed work fall below the £50,000 or so total to become a 40% taxpayer! Nice one! As of 2023/2024, you can contribute up to £60,000 grossed up pension contributions and get tax relief, subject to your salary plus self-employed income being at least £60,000. If that is less than £60,000, then that is the limit.
Very helpful video and examples in chat - I think I’m making a breakthrough re understanding my tax / pension situation after hunting high and low on internet - thank you
So you claim the extra tax relief and then see it in the following year by an increase in your lower rate tax band. But what if you don’t earn that much the following year . Do you loose it ?.
Hi Kozan thanks for the video! Very useful explanation and as weird as it sounds I couln't find this info anywhere else. One quick question (that you mention in the video but just to double check) I hope you can answer: two weeks ago I opened my first SIPP and I moved some of my savings there (aorund end November 2021). WHEN should I fill the self assesment tax return? After 6th April 2022? If so, can I keep adding contrubitions until 5th April 2022 and claim them after 6th? Thanks in advance.
Hi Alegre, thanks for the comment, I am glad you found the video helpful. Yes to both really :) You should fill out your SA after the tax year is done, so you are open to adding contributions up until 5th April 2022 for it to be counted for that Financial Year 21/22. I hope that has cleared things up. Let me know otherwise :) Also, apologies for the late response, I have fallen ill over the last couple of weeks and I am only catching up on youtube now.
Very helpful video, thank you. 07:17 - Can you apply for the previous years through your self assessment form? (I can't see how if so, only for the year of the self assessment form, e.g. 22-23 right now). Or is it only possible to go back further by contacting HRMC as you outline?
What happens if you put the claimed money back into the pension as a top up? Can you claim tax relief on that contribution too? And so on... Does the maths just work?
Hi Rafe, So to claim on the backdated tax relief, HMRC confirmed to me that you actually need to send them a letter and that it is not possible to claim on backdated payments through Tax Returns or by Phone. I have listed their address below and see the points below of what you will need to include in the letter: Please include: National Insurance Number Full Name Address The tax years that you would like to claim for (the furthest you can go back is 4 years so that is 18/19 currently) For each Tax Year, you need to state your Gross Contribution Amount for that year If you are still unsure, you can send through any supporting documents and HMRC can solve it through there. It does take a couple of weeks to process, and they are likely send you a cheque through the post so you can deposit straight to your back account. The operator did say you may get an email to claim online but she was unsure. Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options, *Address: PAYE SA HMRC BX9 1AS*
Hi Kozan; could you please advise where exactly on the online tax return and how the additional tax on pension contributions for year 2021-2022 and year 2020-2021 can be claimed? I have a personal private pension and NEST pension contributions to input to the form. Many thanks; Rafe
Hi just wondering could you answer a question for me please. I’m a 20% tax payer but this year I’ll be going in to the 40% bracket by about 7k, my question is will I keep paying 40% at the start of the next tax year or will I return to 20% ?
It really depends. If your total gross income for this tax year surpasses the higher rate threshold (i.e. £50,271 or more) , then you will pay a higher rate tax on a proportion of your income in this tax year. If your gross income falls below this, then you will remain as a basic rate tax payer. Hope this makes sense. Let me know if not.
Many thanks Kozan for great cvideo and content. Thumps up, echlo that Ithis is only video that explains it well I found over long time. One question I have in example you showed, it claimed £18750 for 15000 paid into pension, but you have broken down £15000 into two parts £5271 at 20%tax relief and £9729 at 40% relief, I was expecting the relief to target the amount at %40, so if you do similar calculation for each part it totals to(£5271/80*100+9729/60*100)=£22803.75 So why was this is not total to put in tax return column in form and instead of amount you showed claimed for £15000 with a 20% tax relief as £18750 figure? Appreciate your answers and look forward to it
Hi Hassan, Please accept my apologies for this long overdue response. This is an excellent question and I hope the following clears things up. *Why do we put only 20% Tax Relief (i.e. £18,750) and not the tax relief including the 40% relief?* In short, HMRC's answer was that they only ever need the value at the 20% Relief Level and from this value they will appropriately calculate the correct tax relief for you automatically (so including the extra relief for Higher or Additional Rate Holders). The operator I spoke to, couldn't answer why this happens, she just simply said that all they need is the Basic Rate Level and then they do the working outs on their end automatically. So this is why we put the £18,750 number. Now I am not claiming to be a Tax Expert, but from what I can deduce, the reason why we only need to provide this 20% Relief Number, is that this value will then be used to adjust your Basic Rate Band for the following year (please see Timestamp 10:30 in my video where I explain this). The number we provide to HMRC Increase our Basic Income Tax Allowance for the following year which essentially recoups the High Rate Tax Relief. So I hope that has made it clearer as to why we only need to put the £18,750 number. The section in the video where I illustrate that £5271 and £9729 split from our £15,000 Pension Contribution, is just to demonstrate how the higher rate tax relief works. As it a common misconception that Higher Rate Tax Relief can be applied across the entire Pension Contributions, which isn't the case (it is only a proportion).
@@FinancialMadness Wouldn't this mean that we could be getting more or less tax relief if the High Rate Tax Relief goes up/down next year (example it went up to 42%).
@@jomythomas7490The adjustment is made to cover the relief that needs to be paid. If the 40% rate increases, the next year, then contributions in THAT year would benefit from 42% tax relief.
Thanks for the video, amazing explanation. I understand this is for people who have SIPP, right? Is it legal to have NHS pension, salary sacrifice and SIPP at the same time?
Hi, great video, can you advise me if I can 40% tax relief at earnings above £43,663 as I live in Scotland and this is the threshold for the higher tax rate
@@FinancialMadness that's great, but when I fill in the form to see if I need to fill in the self assessment form, hmrc say that I don't need to fill in a self assessment, it's a bit of a catch 22. Do you have any advice how to make the claim?
Thank for your shares. I have 2 questions: If I have only dividend income 100,000 and I made a Gift Aid to a charity under Gift Aid Scheme 20.000. So, Gift Aid donation is always taxable at 20%? The tax relief = (38.1% - 7.5%) or (38.1% - 20%)? Thanks in advance
Hi Thanks for the video...any chance to email you directly to talk a bit more about this. I'm a higher rate earner and only reliased recently that I needed to claim back tax relief and been paying in significant amounts over the years. You didn't show how to add up the relief for say last four years and get a figure for claim.
Hi Kingsley, yeah no worries. My email is financialmadness1@gmail.com. Please provide as much detail as you can, and will try to get back to you asap :)
Hi, I am in same situation! on 40% tax band, I contribute to my Employer Work pension £200 (taking from my payslip), I have a tax relief invested in my pension of £40, my employer contribute a further £200 directly to my Work pension. Do we need to put in the Tax Reliefs SA box 1 : £200 + £40 = £240 or £200 + £40 + £200 = £440 ? Great Video, great content, Thank you!
hi thanks for the video. it has helped me. Although i noted your form is the paper version i have found the relevant section on the online submission form. One question. Some websites say you should also include employers contributions in the Box 1 Page 6 Section. Therefore it would be employers contributions, employee contributions and then 20% tax relief on employee contributions. Would this be correct?
You need to include the employer contribution as there is a limit of how much can be paid into a pension plan. I suggest that you ring HMRC to confirm that. If you do, please post their response, as it would help all the community here! The way that I see it, that contribution by the employer is like giving you extra pay...except that as it did not go through your payroll, you paid no tax on that benefit, so it should go in gross, ie unadjusted.
Hi, good video sir. I have a question though. If you made contributions of £15000 on the income of £6000 then not all of it would be subjected to tax relief, therefore I think only a portion of it that was subject to higher earner tax relief would be added to your basic rate tax band, or am I talking rubbish? I don’t think it would be the full £18750
does this apply to workplace pension say if your on £65000 and pay into the workplace pension scheme or is it only for things like SIPP or other private pension schemes ??
He dealt with this. If you pay into your workplace pension scheme via your payroll, you have already had the benefit of any tax relief. So nothing for you to do!
Slightly concerned, like other comments have expressed, that the GOVT tax relief for higher rate tax payers explained in your video is by way of increasing the basic rate band for NEXT financial year. I complete self-assessment, so do not call HMRC directly all done by on line form, do you get the option to state you want a tax rebate (cheque in post) for current financial year’s over payment or will I still need to call HMRC to peruse that method of being paid back?
Tax rebate can be paid by cheque or directly into your bank account. I’ve just completed mine and that’s how I’d expect it. On the form you can select how you want it paying.
Hi Kozan; could you please advise where exactly on the online tax return and how the additional tax on pension contributions for year 2021-2022 and year 2020-2021 can be claimed? I have a personal private pension and NEST pension contributions to input to the form. Many thanks; Rafe
It says on the SA form at 8:49 that payments made before tax is paid cannot be included. But what if those payments only had a 20% tax relief applied but additional relief needs to be applied for? Can they still be included?
Hi Kozan, this is very helpful but can I ask a question please? My contributions are from Net Pay Arrangements and my income was just over £50,400 so I assume that the tax relief is taken care off and 20% for 50,200 and 40% for the extra £200. However, I have additional income from a rental property that takes my total income in the £60,000s but neither my employer nor the pension company know this. Do you know if I can I claim this through my Self Assessment pls?
Yes, as your contributions are done via the payroll system, then you automatically get all the tax relief due (the pension fund claims the 20%, and your pension contribution reduces your taxable earnings, such that the part of your salary that was into the 40% band now has fallen into the 20% band; therefore you have benefited from paying 20% less, ie instead of paying income tax of 40% on that excess, now you are only paying 20%. As for your rental income, that will sit on top of your salary and take you back into the 40% bracket. If you can afford it, what you could do is to make a bigger pension fund contribution, so that all of the taxable salary falls sufficiently so that all of your rental income falls into the 20% band, saving you tax. In fact, if you have sufficient savings you could in this fiscal year, 2023/2024, make a contribution equal to your entire salary! This would make none of your salary taxable, as the pension fund contribution is a fully tax deductible expense (up to a maximum of your salary or £60,000 whichever is lower). Then, the first £12,500 or so of your rental income would fall into the zero rate band! You would end up paying no tax on all your income!
Very helpful thank you!
Could you show us where on the self assessment online tool can we find the section to include this tax relief please?
Excellent, thank you!
Thanks for your video. There's a subtlety here that raises a question, which could have a very big impact on how much of a pot you could build up. It seems obvious to me that 1) The tax relief you get back at the 40% can be reinvested the following year and relief claimed ON THAT, since HMRC adjusts your tax rate or gives you a rebate, so that's cash in your pocket and you can do whatever you want with it. Reinvesting such a large "effective rate of return" can produce massive results, up to the annual limits of course. But, 2) The relief you get at the 20% rate cannot be reinvested/reclaimed in this way, since the pension provider just adds it to your pension without your involvement, therefore the tax reliefs at the 20% and 40% cannot be treated in the same way. So either my assumption about 1) is incorrect, so that you cannot claim relief on pension investments which originated from cash claimed from tax relief, but that seems unlikely because it is just cash in my bank account, or assumption about 2) is incorrect, so that the relief automatically added at the 20% rate does in fact count as a pension contribution in of itself which you can further claim tax relief on. As absurd as the latter may sound, some of the information I've read says that a SIPP pension provider adds in the 20% as cash, which you can then presumably reinvest into an investment fund. Does that reinvestment count as a pension contribution which you can claim tax relief on? If not, then why can you do this with your 40% relief?
Any update on these questions/assumptions,pls?
Really helpful, thank you. One question I do have, however, is can you only claim the higher tax relief on your personal contributions and not your employee contributions too? Or can you claim on both? E.g. if I contribute 8% and my employer contributes 3%, can I claim on 11%?
Really informative video, thanks. Quick question :
What happens if you do not earn enough to take advantage of the tax relief applied for the next financial year. I. E the basic rate threshold has been increased to £70k to account for your contributions, but you only earn £60k that year. Do you lose the remaining relief, or is it carried over to the following year?
Hi Josh
Thank you for the kind words, I am glad you thought it was informative.
Excellent question, if this occurs then you have essentially paid too much tax and you should be entitled to a tax rebate, which comes in the form of a cheque (from HMRC) which you simply deposit. Its best to speak with HMRC directly when this happens and they can best advise on timelines for your situation. I hope this clears things up.
Congratulations. Fantastic video. Very helpful. I still have a question. You explained that for peopled on the 40% tax band, the extra 20% needs to be claimed. Once claimed, on the following year the Basic tax band increases accordingly allowing you to recover that extra 20% but... what happens if you take a paycut or somehow you cannot take full advantage of that increase of the band? Can i effectively end up losing some or all of this tax relief? Can it be carried forward to a future year so that there is no loss?
Hi MrLacos,
Thank you for the kind words and I am pleased to hear you found the video helpful.
Excellent question, if this occurs then you have essentially paid too much tax and you should be entitled to a tax rebate, which comes in the form of a cheque (from HMRC) which you simply deposit. Its best to speak with HMRC directly when this happens and they can best advise on timelines for your situation. I hope this clears things up.
Thanks so much for sharing this - so useful! One question I have, if I want to claim for previous years I'm guessing I should not do that on this year's self assessment. Is the only way then to call or write to HMRC?
Hi Matthew,
So to claim on the backdated tax relief, HMRC confirmed to me that you actually need to send them a letter and that it is not possible to claim on backdated payments through Tax Returns or by Phone.
I have list their address below and see the points below of what you will need to include in the letter:
Please include:
National Insurance Number
Full Name
Address
The tax years that you would like to claim for (the furthest you can go back is 4 years so that is 17/18 currently)
For each Tax Year, you need to state your Gross Contribution Amount for that year
If you are still unsure, you can send through any supporting documents and HMRC can solve it through there.
It does take a couple of weeks to process, and they are likely send you a cheque through the post so you can deposit straight to your back account. The operator did say you may get an email to claim online but she was unsure.
Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options,
*Address:
PAYE SA
HMRC
BX9 1AS*
Great Video, thank you. Does the same apply if contributions are made to SIPP ?
Yes, absolutely. The tax relief is applicable to any private pension contribution you make.
Great video; thank you! So if I am not self-employed then do I need to call up HMRC to get the additional tax relief?
That is probably the easiest option. But you can do it via the form as demo'd in my video
Very helpful video, thank you very much!
Thank you. I am glad you found it helpful
Nice recap..much love from kenya
Brilliant video, thank you, I also was not aware of this and I have just completed my 21-22 tax return and entered the pension contribution value, it all makes sense in the final calculation 🙂
however is there any way of claiming for the year 20-21 on this years tax return?
Many thanks
Hi James,
Thank you for the kind words, I am glad you found this video helpful. Apologies for the delay in my response, but to claim on the backdated tax relief, HMRC confirmed to me, that you actually need to send them a letter. And that it is not possible to claim on backdated payments through Tax Returns or by Phone.
I have listed their address below along with a list of that you will need to include in the letter.
Please include:
National Insurance Number
Full Name
Address
The tax years that you would like to claim for (the furthest you can go back is 4 years)
For each Tax Year, you need to state your Gross Contribution Amount for that year If you are unsure on these numbers, you can send through any supporting documents to HMRC. And HMRC can solve it using the documents you provided.
It does take a couple of weeks to process, and they are likely going to send you a cheque through the post so you can deposit straight to your back account.
When I spoke to HMRC, the operator did say that you may get an email to claim the amount online but they weren't sure.
Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options,
*Address:
PAYE SA
HMRC
BX9 1AS*
Buy vcts inside your sipp is an interesting way to do it
just one question when calculating your pension contributions do you also take into consideration your employers contributions also ? TIA
No
Could you do a video for people with a side hustle? So you are paye (40% tax bracket) and make like 5k in side hustle. How can i put 5k into my pension without a tax bill or at least reduced
Thanks. I have taken a small hiatus from RUclips. But I am working on my return. Will add this to my list. I love this topic!
Thank you for the video
So, in summary, we put the net figure, plus basic rate tax relief in the box. The additional 20% for the higher rate tax payers comes by way of increase to the basic rate threshold in the following tax year (so for 2021/22 filing, the basic rate threshold for 2022/23 is increased)? It does seem strange that we pay HMRC just after the tax year to then get the same amount back over 12 months...
You get 20% tax relief very quickly, but the balance, you have to wait. Benefits the cash flow of HMRC!
Probably an obvious question but when should you call them, before April, after or just when ever you choose?
If your referring to when to contact them to make a claim on extra tax relief. This should be after the tax year has passed. If your claiming it through your self-assessment tax returns, then you need to do it before their deadlines too. www.gov.uk/self-assessment-tax-returns/deadlines
IF you only regain the tax by it increasing your tax bands the next year... What if you don't work the following year? - Do you lose the benefit?
As a higher rate taxpayer should i do salary sacrifice or make personal pension contributions, or do they have the same net impact
Thanks for the information. what happens if you are both employed and self employed. For example you make 45K per year through employment and 10K extra as self employed.
I am already enrolled in NHS pension but I do extra work privately and want to contribute 5k extra to a SIPP. how would tax reliefe work in this situation?
Ask the people who run your NHS payroll, but I feel pretty confident that you would have got all of the tax relief via your payroll.
Presumably, the SIPP payment is in connection with your self-employed income? As that payment is from income not yet taxed (unlike your NHS salary), then your self-employed income becomes just £5,000 subject to tax, ie £10,000 minus £5,000 pension contribution.
Next, that £5,000 gets added to your NHS income minus the grossed up contribution paid on your NHS salary. Therefore, depending on what the total is of your NHS pension contributions, you look like you may not be a 40% taxpayer! Why? Your taxable salary (after pension contributions) plus the £5,000 from your self-employed work fall below the £50,000 or so total to become a 40% taxpayer! Nice one!
As of 2023/2024, you can contribute up to £60,000 grossed up pension contributions and get tax relief, subject to your salary plus self-employed income being at least £60,000. If that is less than £60,000, then that is the limit.
Very helpful video and examples in chat - I think I’m making a breakthrough re understanding my tax / pension situation after hunting high and low on internet - thank you
So you claim the extra tax relief and then see it in the following year by an increase in your lower rate tax band. But what if you don’t earn that much the following year . Do you loose it ?.
Would it be possible to provide an example letter for hmrc please?
Hi Kozan thanks for the video! Very useful explanation and as weird as it sounds I couln't find this info anywhere else. One quick question (that you mention in the video but just to double check) I hope you can answer: two weeks ago I opened my first SIPP and I moved some of my savings there (aorund end November 2021). WHEN should I fill the self assesment tax return? After 6th April 2022? If so, can I keep adding contrubitions until 5th April 2022 and claim them after 6th? Thanks in advance.
Hi Alegre, thanks for the comment, I am glad you found the video helpful.
Yes to both really :) You should fill out your SA after the tax year is done, so you are open to adding contributions up until 5th April 2022 for it to be counted for that Financial Year 21/22. I hope that has cleared things up. Let me know otherwise :)
Also, apologies for the late response, I have fallen ill over the last couple of weeks and I am only catching up on youtube now.
Very helpful video, thank you. 07:17 - Can you apply for the previous years through your self assessment form? (I can't see how if so, only for the year of the self assessment form, e.g. 22-23 right now). Or is it only possible to go back further by contacting HRMC as you outline?
You submit an adjusted net tax after your self assessment is submitted
What happens if you put the claimed money back into the pension as a top up?
Can you claim tax relief on that contribution too? And so on...
Does the maths just work?
Hi; thanks for the helpful information. I've got a question please; can I claim the last 4 year on the same self assessment tax return form?
Hi Rafe,
So to claim on the backdated tax relief, HMRC confirmed to me that you actually need to send them a letter and that it is not possible to claim on backdated payments through Tax Returns or by Phone.
I have listed their address below and see the points below of what you will need to include in the letter:
Please include:
National Insurance Number
Full Name
Address
The tax years that you would like to claim for (the furthest you can go back is 4 years so that is 18/19 currently)
For each Tax Year, you need to state your Gross Contribution Amount for that year
If you are still unsure, you can send through any supporting documents and HMRC can solve it through there.
It does take a couple of weeks to process, and they are likely send you a cheque through the post so you can deposit straight to your back account. The operator did say you may get an email to claim online but she was unsure.
Please note this is for backdated years only, for current tax years you can still write into them (once the appropriate time has elapsed, remember this can only be done once the tax year is over) otherwise, by phone or Self Assessment are possible options,
*Address:
PAYE SA
HMRC
BX9 1AS*
Many thanks for your kind reply & advice
Hi Kozan; could you please advise where exactly on the online tax return and how the additional tax on pension contributions for year 2021-2022 and year 2020-2021 can be claimed? I have a personal private pension and NEST pension contributions to input to the form. Many thanks; Rafe
Hi just wondering could you answer a question for me please. I’m a 20% tax payer but this year I’ll be going in to the 40% bracket by about 7k, my question is will I keep paying 40% at the start of the next tax year or will I return to 20% ?
It really depends.
If your total gross income for this tax year surpasses the higher rate threshold (i.e. £50,271 or more) , then you will pay a higher rate tax on a proportion of your income in this tax year.
If your gross income falls below this, then you will remain as a basic rate tax payer.
Hope this makes sense. Let me know if not.
Great video
Thank you! I am glad you enjoyed it 😊
Many thanks Kozan for great cvideo and content. Thumps up, echlo that Ithis is only video that explains it well I found over long time.
One question I have in example you showed, it claimed £18750 for 15000 paid into pension, but you have broken down £15000 into two parts £5271 at 20%tax relief and £9729 at 40% relief, I was expecting the relief to target the amount at %40, so if you do similar calculation for each part it totals to(£5271/80*100+9729/60*100)=£22803.75
So why was this is not total to put in tax return column in form and instead of amount you showed claimed for £15000 with a 20% tax relief as £18750 figure?
Appreciate your answers and look forward to it
Hi Hassan,
Please accept my apologies for this long overdue response. This is an excellent question and I hope the following clears things up.
*Why do we put only 20% Tax Relief (i.e. £18,750) and not the tax relief including the 40% relief?*
In short, HMRC's answer was that they only ever need the value at the 20% Relief Level and from this value they will appropriately calculate the correct tax relief for you automatically (so including the extra relief for Higher or Additional Rate Holders).
The operator I spoke to, couldn't answer why this happens, she just simply said that all they need is the Basic Rate Level and then they do the working outs on their end automatically. So this is why we put the £18,750 number.
Now I am not claiming to be a Tax Expert, but from what I can deduce, the reason why we only need to provide this 20% Relief Number, is that this value will then be used to adjust your Basic Rate Band for the following year (please see Timestamp 10:30 in my video where I explain this). The number we provide to HMRC Increase our Basic Income Tax Allowance for the following year which essentially recoups the High Rate Tax Relief.
So I hope that has made it clearer as to why we only need to put the £18,750 number.
The section in the video where I illustrate that £5271 and £9729 split from our £15,000 Pension Contribution, is just to demonstrate how the higher rate tax relief works. As it a common misconception that Higher Rate Tax Relief can be applied across the entire Pension Contributions, which isn't the case (it is only a proportion).
@@FinancialMadness Wouldn't this mean that we could be getting more or less tax relief if the High Rate Tax Relief goes up/down next year (example it went up to 42%).
@@jomythomas7490The adjustment is made to cover the relief that needs to be paid.
If the 40% rate increases, the next year, then contributions in THAT year would benefit from 42% tax relief.
Thanks for the video, amazing explanation. I understand this is for people who have SIPP, right? Is it legal to have NHS pension, salary sacrifice and SIPP at the same time?
Yes IMO
So long as you do not exceed the maximum permitted pension contribution for any given year, you can have as many pension plans as you like!
Hi, great video, can you advise me if I can 40% tax relief at earnings above £43,663 as I live in Scotland and this is the threshold for the higher tax rate
Yes, absolutely. You will actually be able to claim 42% above this amount as that is the tax threshold for higher rate earners.
@@FinancialMadness that's great, but when I fill in the form to see if I need to fill in the self assessment form, hmrc say that I don't need to fill in a self assessment, it's a bit of a catch 22. Do you have any advice how to make the claim?
Thank for your shares. I have 2 questions: If I have only dividend income 100,000 and I made a Gift Aid to a charity under Gift Aid Scheme 20.000. So, Gift Aid donation is always taxable at 20%? The tax relief = (38.1% - 7.5%) or (38.1% - 20%)? Thanks in advance
Hi Thanks for the video...any chance to email you directly to talk a bit more about this. I'm a higher rate earner and only reliased recently that I needed to claim back tax relief and been paying in significant amounts over the years. You didn't show how to add up the relief for say last four years and get a figure for claim.
Hi Kingsley, yeah no worries. My email is financialmadness1@gmail.com.
Please provide as much detail as you can, and will try to get back to you asap :)
Hi Kingsley, I have just dropped you an email with a response. Please let me know if you have any further questions
Thanks
Hi, I am in same situation! on 40% tax band, I contribute to my Employer Work pension £200 (taking from my payslip), I have a tax relief invested in my pension of £40, my employer contribute a further £200 directly to my Work pension. Do we need to put in the Tax Reliefs SA box 1 : £200 + £40 = £240 or £200 + £40 + £200 = £440 ?
Great Video, great content, Thank you!
hi thanks for the video. it has helped me. Although i noted your form is the paper version i have found the relevant section on the online submission form. One question. Some websites say you should also include employers contributions in the Box 1 Page 6 Section. Therefore it would be employers contributions, employee contributions and then 20% tax relief on employee contributions. Would this be correct?
My question exactly. Guess we’ll have to research as he’s not responding to Qs on this video anymore
You need to include the employer contribution as there is a limit of how much can be paid into a pension plan.
I suggest that you ring HMRC to confirm that. If you do, please post their response, as it would help all the community here!
The way that I see it, that contribution by the employer is like giving you extra pay...except that as it did not go through your payroll, you paid no tax on that benefit, so it should go in gross, ie unadjusted.
Hi, good video sir. I have a question though. If you made contributions of £15000 on the income of £6000 then not all of it would be subjected to tax relief, therefore I think only a portion of it that was subject to higher earner tax relief would be added to your basic rate tax band, or am I talking rubbish? I don’t think it would be the full £18750
The £15,000 pension contribution was all subject to tax relief in the video as the salary was more than £15,000. Watch it again.
does this apply to workplace pension say if your on £65000 and pay into the workplace pension scheme or is it only for things like SIPP or other private pension schemes ??
He dealt with this. If you pay into your workplace pension scheme via your payroll, you have already had the benefit of any tax relief. So nothing for you to do!
Slightly concerned, like other comments have expressed, that the GOVT tax relief for higher rate tax payers explained in your video is by way of increasing the basic rate band for NEXT financial year. I complete self-assessment, so do not call HMRC directly all done by on line form, do you get the option to state you want a tax rebate (cheque in post) for current financial year’s over payment or will I still need to call HMRC to peruse that method of being paid back?
Tax rebate can be paid by cheque or directly into your bank account. I’ve just completed mine and that’s how I’d expect it. On the form you can select how you want it paying.
If HMRC pay you by cheque for the overpayment, then the following tax year the tax rates and allowances would not be adjusted.
Hi Kozan; could you please advise where exactly on the online tax return and how the additional tax on pension contributions for year 2021-2022 and year 2020-2021 can be claimed? I have a personal private pension and NEST pension contributions to input to the form. Many thanks; Rafe
To input the details of the pensions, go to Page 4 of the core return.
It says on the SA form at 8:49 that payments made before tax is paid cannot be included. But what if those payments only had a 20% tax relief applied but additional relief needs to be applied for? Can they still be included?
How would you get 20% tax relief on income that has not been subjected to tax?
Hi Kozan, this is very helpful but can I ask a question please? My contributions are from Net Pay Arrangements and my income was just over £50,400 so I assume that the tax relief is taken care off and 20% for 50,200 and 40% for the extra £200. However, I have additional income from a rental property that takes my total income in the £60,000s but neither my employer nor the pension company know this. Do you know if I can I claim this through my Self Assessment pls?
Yes, as your contributions are done via the payroll system, then you automatically get all the tax relief due (the pension fund claims the 20%, and your pension contribution reduces your taxable earnings, such that the part of your salary that was into the 40% band now has fallen into the 20% band; therefore you have benefited from paying 20% less, ie instead of paying income tax of 40% on that excess, now you are only paying 20%.
As for your rental income, that will sit on top of your salary and take you back into the 40% bracket. If you can afford it, what you could do is to make a bigger pension fund contribution, so that all of the taxable salary falls sufficiently so that all of your rental income falls into the 20% band, saving you tax. In fact, if you have sufficient savings you could in this fiscal year, 2023/2024, make a contribution equal to your entire salary! This would make none of your salary taxable, as the pension fund contribution is a fully tax deductible expense (up to a maximum of your salary or £60,000 whichever is lower). Then, the first £12,500 or so of your rental income would fall into the zero rate band! You would end up paying no tax on all your income!
Hi Is this applicable for NHS staff too ?
I strongly suspect that you get full tax relief via your payroll. But do ask the people that run your payroll.