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bigduckontax
bigduckontax, Accountant
Category: Tax
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am i entitled to tax relief on a secondary pension

Customer Question

am i entitled to tax relief on a secondary pension
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
, I'm Keith and happy to help you with your question.
Do you mean you have taken out a secondary pension? In which case tax relief will almost certainly apply and will be adjusted at source through your premium payments. Alternatively if you are receiving a secondary pension it will be taxed as income in the normal way. Tax is not normally deducted at source, but you can request that it be so adjusted by the insurance company.
I do hope I have solved your conundrum ; if not don't hesitate to ask an query.
Customer: replied 2 years ago.

Keith

Thanks assistance.

I am currently in full time work but due to the company freezing my DB pension scheme and starting a new DC scheme, I decide to take my DB pension a year early and invest this to try and make up the shortfall in the frozen DB scheme.

I now receive a salary and DB pension but have elected to enrol into the new company DC scheme. However I intend to pay £2000 a month from my salary into this new scheme but hope this £2000 is non taxable at source.

Apologies if I have not explained this very well !!

Thanks

Steve

Expert:  bigduckontax replied 2 years ago.
I think I have got it Steve. Your salary and the payments from the pension will be taxed in the normal way. HMRC will probably reduce your tax code number to collect the tax due on the pension being paid gross to make you tax neutral at the year end.
When you pay into pension schemes there is a limit to the amount payable. Firstly it must not exceed 100% of salary. Furthermore, in the current tax year, it may not exceed, including any employer contribution, 40K. Last year and the year before there was a 50K limit.
There is information on pension schemes available at the UK Gov web site here:
https://www.gov.uk/workplace-pensions/changing-jobs-and-taking-leave
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Customer: replied 2 years ago.

Keith

The whole things seems to confuse my payroll company. HMRC sent me a new tax code of D0 on all my earnings, I rang to query this and they admitted a mistake and this should have only applied to my pension earnings. I then explained my situation on continuing to pay into the new DC scheme, they said they would re evaluate my taxes code in writing. I then received a new tax code of 1400L, which according to my calculation would result in a tax under payment of £750 year taking into account salary and pension received, assuming i was entitled to tax relief on my £2000 DC contribution.

After contacting my payroll company they now are querying whether my £2000 DC contribution is liable relief, hence my question here today.

rgds

Steve

Expert:  bigduckontax replied 2 years ago.
Sounds like a right mess, doesn't it Steve. At least HMRC have come up trumps!
I must say I cannot see how your payroll company has any input to your additional contribution to the DC scheme. The tax arrangements are a matter DC Scheme administrators, usually an insurance company, and HMRC, or possibly both, but not the payroll company. You may have to take a firm line with the latter and tell them to wind their necks in on the subject.
Customer: replied 2 years ago.

Obviously I am no tax expert, but as I understand the rules, as long as I am not re-investing my pension into the DC scheme, which is not the case as this goes into savings, my normal salary is taken DC scheme.

My monthly salary before tax is £3900 my pension is £1455, from my salary I hope to pay £2000 into the DC scheme but can only afford to do so if this does not become part of my taxable salary. I have requested to talk with the payroll tax (expert) to get some clarity, I have also spoken with HMRC but they talk in a very technical way and I am not always sure we are talking about the same situation. My hope is that I get some guidance from you to see if I am on the right track on all this.

I thinks as long as I do not exceed the maximum allowable contribution I am eligible relief at source DC scheme ?

Apologies amount of time taken over this, but my plans in 2016 hinge on my DC scheme contributions.

Rgds

Steve

Expert:  bigduckontax replied 2 years ago.
In my experience Steve, talking with HMRC staff is guaranteed to get hold of the wrong end of the stick if they can even find the stick at all. Keep to written communications with HMRC is always my advice.
You are correct in your surmise that providing you do not exceed the maximum allowable levels you will receive tax relief, usually at source, on your pension contributions. Ensure that only taxable emoluments are included in your contributions calculations, not other pension receipts.
Regards
Keith
Customer: replied 2 years ago.

Sorry Keith

"taxable emoluments" ?

Expert:  bigduckontax replied 2 years ago.
Income from employment or self employment or both.
Customer: replied 2 years ago.

Thanks Keith

Time to sort out the payroll company now !!

Best regards

Steve

Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.
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Expert:  bigduckontax replied 2 years ago.
Thank you support.