Tax Relief on Pension Contributions

by **istanbul** on Wed Jul 06, 2011 11:14 am

I am 59 and drawing down part of my company pension and have a tax code on this of 747l
I am still working and paying 100% of my earnings in to AVCs for this scheme.
My tax code on my earnings is D0 and my employer believes that I have to pay tax on part of this income as I have no tax free allowance.
Are they correct or should 100% of my earnings(minus NICS) be going to my company pension?
So far this financial year I have received no net pay but have paid £880 in tax

by **Tax Champion** on Thu Jul 07, 2011 4:57 pm

Have you actually told HMRC how much you are paying in contributions? a D0 code against your earnings means that you pay 40% tax (your employer is correct here), and are therefore entitled to additional relief on your contributions - code 747L is the basic code, and suggests no such relief has been given.
If you are well into the higher rate tax bracket you will still have 40% deducted on your earnings, but a coding adjustment would mean you pay less tax on your pension - whether this is the best way round would depend on the figures.

by **istanbul** on Fri Jul 08, 2011 9:56 am

My understanding is that pension contributions are paid minus NICs and before tax, therefore if I am paying 100% of earnings in to my company scheme irrespective of my tax code I should have no tax liabilty, assuming contibutions are less than £50000 10/11

by **section 44** on Fri Jul 08, 2011 10:06 am

istanbul wrote:My understanding is that pension contributions are paid minus NICs and before tax,

Typcially basic rate tax relief (20%) only is given at source - that is, when the contribution is paid. Any additional tax relief needs to be claimed, typcially through your tax return or tax code. This would explain why you have paid tax through PAYE but not received any net pay.