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Where Taxpayers and Advisers Meet

Higher rate tax relief on pension

Mark77
Posts:1
Joined:Sat Oct 08, 2016 10:17 am
Higher rate tax relief on pension

Postby Mark77 » Sat Oct 08, 2016 10:25 am

Hi, I was recently made redundant from my job which I paid 40% tax on my salary. The Redundancy payment came 2 weeks after my final monthly payslip. £12500 of my redundancy was taxed at 45%. My question is,If I pay this amount into a private pension will the government contribute the 45% and how will they know to do so at the higher rate?

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Higher rate tax relief on pension

Postby robbob » Sat Oct 08, 2016 11:55 am

Hello Mark

You need to look at your taxable earnings for the complete tax year (6/4-5/4) to make the calculations as to what rate relief you will get with regard to any pension contributions you make.
how will they know to do so at the higher rate?
If you pay directly into a pension yourself (or via deduction from net salary) where basic rate relief has been given at source you will need to advise hmrc what you have paid into your pension in this tax year for them to give the higher rate relief as appropriate (probably 40% if you are higher rate taxpayer not earning over 100k ). Note hmrc may already have made some provision in this regard as an estimate via tax coding adjustment if you regularly contribute into a pension.


As an aside the 45% deduction rate is a often bit of a red herring and a guard against the unlikely scenario that all those earnings would be liable to the 45% rate, so it is likely unless you are a "Super Earner" earning over 150k there is probably a latent tax rebate waiting for you as things stand.


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