How much HRT relief can be claimed?

[Shaker]

Hello all, does anyone here have experience of this?

Salary of £55,270. Only income source. This means £5,000 of the salary is subject to Higher Rate Tax, based on a full personal allowance of £12,570 being available. Therefore, to reclaim the full tax relief available via a pension contribution it would be a £4k payment, £1k added via the SIPP administrator and then a further £1k of tax relief adjusted via tax code or self-assessment. All makes sense so far.

HOWEVER, what if the person's tax code for employment during 21/22 was not the normal 1257L, but instead 1157L? An extra £1,000 is subject to HRT so to claim the full HRT relief available would it be a £4,800 contribution, £1,200 reclaimed via SIPP administrator and then a further £1,200 via tax code/SA?

[bluedonkey]

What explains the lower code? Details please.

[Shaker]

The person told me it relates to having underpaid tax in a previous tax year.

[scrumpyjack]

Hello all, does anyone here have experience of this?

Salary of £55,270. Only income source. This means £5,000 of the salary is subject to Higher Rate Tax, based on a full personal allowance of £12,570 being available. Therefore, to reclaim the full tax relief available via a pension contribution it would be a £4k payment, £1k added via the SIPP administrator and then a further £1k of tax relief adjusted via tax code or self-assessment. All makes sense so far.

HOWEVER, what if the person's tax code for employment during 21/22 was not the normal 1257L, but instead 1157L? An extra £1,000 is subject to HRT so to claim the full HRT relief available would it be a £4,800 contribution, £1,200 reclaimed via SIPP administrator and then a further £1,200 via tax code/SA?

Tax codes do not affect how much tax relief at what rate is due. They simply affect the timing and method of deduction/recovery of tax. So it cannot affect how much higher rate relief you will ultimately get.

[mc2fool]

Hello all, does anyone here have experience of this?

Salary of £55,270. Only income source. This means £5,000 of the salary is subject to Higher Rate Tax, based on a full personal allowance of £12,570 being available. Therefore, to reclaim the full tax relief available via a pension contribution it would be a £4k payment, £1k added via the SIPP administrator and then a further £1k of tax relief adjusted via tax code or self-assessment. All makes sense so far.

HOWEVER, what if the person's tax code for employment during 21/22 was not the normal 1257L, but instead 1157L? An extra £1,000 is subject to HRT so to claim the full HRT relief available would it be a £4,800 contribution, £1,200 reclaimed via SIPP administrator and then a further £1,200 via tax code/SA?

Tax codes do not affect how much tax relief at what rate is due. They simply affect the timing and method of deduction/recovery of tax. So it cannot affect how much higher rate relief you will ultimately get.

Or to put it another way, the tax code is neither a reflection of nor determines the amount of the personal allowance*, which is what Shaker seems to be believing is the situation. 1257L or 1157L, their personal allowance will still be £12,570.

The tax code is simply a mechanism for HMRC to try and collect the right amount of total income tax due directly by PAYE. If your only income is your salary then your tax code will be 1257L and your employer will know exactly how much to deduct and send to HMRC. However, if you also have other income that your employer doesn't know about, say interest or dividends above their zero rate bands, but HMRC does (or might guess at) 'cos you declared it in previous years, then they'll give you a lower code so that your employer will deduct (close to) the correct total amount of income tax due under PAYE.

* except possibly if your income is more than £100K.

[bluedonkey]

Hello all, does anyone here have experience of this?

Salary of £55,270. Only income source. This means £5,000 of the salary is subject to Higher Rate Tax, based on a full personal allowance of £12,570 being available. Therefore, to reclaim the full tax relief available via a pension contribution it would be a £4k payment, £1k added via the SIPP administrator and then a further £1k of tax relief adjusted via tax code or self-assessment. All makes sense so far.

HOWEVER, what if the person's tax code for employment during 21/22 was not the normal 1257L, but instead 1157L? An extra £1,000 is subject to HRT so to claim the full HRT relief available would it be a £4,800 contribution, £1,200 reclaimed via SIPP administrator and then a further £1,200 via tax code/SA?

Tax codes do not affect how much tax relief at what rate is due. They simply affect the timing and method of deduction/recovery of tax. So it cannot affect how much higher rate relief you will ultimately get.

Well, it might, which is why I queried it. It could have been medical bik for example. Getting full details from the client is an art.

[pje16]

The tax code is simply a mechanism for HMRC to try and collect the right amount of total income tax due directly by PAYE. If your only income is your salary then your tax code will be 1257L and your employer will know exactly how much to deduct and send to HMRC. However, if you also have other income that your employer doesn't know about, say interest or dividends above their zero rate bands, but HMRC does (or might guess at) 'cos you declared it in previous years

HMRC "guessed" or to more precise estimated mine for 2022/23 based on 2020/21 (yes 2 years before)
I have nver deaclred it to them, they get interest reported to them by financial institutions
That went over my £500 allowance so I called them we went through my interest sources one by one (she read them out and I corrected them)
and my code was put back to 1257
Don't be scared to call, them they want to get the tax right and are frienldy (unless you are up to no good I guess)

[TUK020]

Hello all, does anyone here have experience of this?

Salary of £55,270. Only income source. This means £5,000 of the salary is subject to Higher Rate Tax, based on a full personal allowance of £12,570 being available. Therefore, to reclaim the full tax relief available via a pension contribution it would be a £4k payment, £1k added via the SIPP administrator and then a further £1k of tax relief adjusted via tax code or self-assessment. All makes sense so far.

HOWEVER, what if the person's tax code for employment during 21/22 was not the normal 1257L, but instead 1157L? An extra £1,000 is subject to HRT so to claim the full HRT relief available would it be a £4,800 contribution, £1,200 reclaimed via SIPP administrator and then a further £1,200 via tax code/SA?

The way I understand this (don't claim to be an expert) is probably oversimplified, but more easily workable:

Gross income - Gross pension contributions* = taxable income

Gross income = gross salary + benefits in kind + etc etc
* up to a max of £40k, or Gross income whichever is smaller.

Therefore your worked example is correct unless the tax code relates to additional income/benefits from somewhere