Personal pension contributions
Hi,
I work full time and max out my contributions to my current pension, but I also have a pension from a previous employer that I'm interested in making additional contributions too, but how will that affect my tax return? At the moment it's simple with one full time job, I don't have to complete a self-assessment. If I make contributions to the previous scheme, will I have to do the SA or will HMRC know about it automatically?
Does anyone else do this? And is it possible to ask my employer to make the deductions to other scheme before tax?
What's best?
Thanks in advance for the insight.
Posted Jul 18, 2018, 6:24 PM UTC
107
HMRC won't know about it, but the pension company will automatically claim back the basic rate tax paid on your contributions (so a £100 contribution will actually put £125 into your pension). It will only make a difference if you are near to or are in the 40% bracket. If you're near to or just in, the contributions can be discounted against your taxable income, meaning you might drop into the lower tax band. If you're well over, you can claim back the additional tax that you paid on the money you contributed.
Just write to them, no need to do a self assessment. Source : I was right on the 40% border last year and my contributions bought me back down under it, when I got a letter saying I owed tax I wrote back with my pension statements and they said "oh, OK".
!thanks for the detailed answer
Just wanted to add not all pension companies automatically add 20% tax so you should confirm this with them.
If your pension company doesn't automatically reclaim the 20% from hmrc then OP should probably stop and wonder why and rethink what they're investing in, why and with what company.
... The pension companies designed for normal people with normal goals will reclaim the 20%.
When I opened a SIPP recently I was asked during the application process if they should claim tax relief at source. I'd assume that the question would either be explicitly asked or assumed that tax relief should be applied.