Another personal tax question - Personal Pension Contributions

NickyW

Hi there
I understand that if you make say £5000 worth of personal pension contributions, the upper tax of 37400 would be raised to 42400.
What I don't understand is what is the benefit if you are a lower rate tax payer say earning £20k a year.
Also how does this translate in the real world - if you work in an office does the employee have to show some sort of documentation showing how much has been paid into their pension. Is the tax adjusted at the end of the year?

Regards
Nicky

Fireraiser

The benefit a basic rate taxpayer gets, is that for every £80 (s)he pays into a PPP, the provider claims £20 back from HMRC, thus investing £100. This also works for Stakeholder Pensions

sama

If a higher rate tax payer is in this situation, does (s)he need to do a tax return to claim the increased higher rate band? It is just my feeling that it wouldn't be done automatically. Could someone confirm this?

Fireraiser

sama wrote: »

If a higher rate tax payer is in this situation, does (s)he need to do a tax return to claim the increased higher rate band? It is just my feeling that it wouldn't be done automatically. Could someone confirm this?

Yes, self assessment form is needed. ICBW, but aren't all higher rate tax payers sent SA returns as a matter of course?

Monsoon

Fireraiser wrote: »

ICBW, but aren't all higher rate tax payers sent SA returns as a matter of course?

That assumes HMRC are competent..........

And no, the onus is on the tax payer to notify HMRC if they have additional liability.

A-Vic

Monsoon wrote: »

That assumes HMRC are competent..........
.

Hahahahahahah LMAO now that has to be the funnest thing ive read