Payroll pension contributions- UK higher rate tax relief

Question

In the UK, a higher rate taxpayer who contributes to a pension scheme is entitled to pension relief to recover the difference between basic rate and higher rate tax for pension contributions.

(HM Revenue and Customs (HMRC) refund the basic rate income tax directly to the scheme or and contribute to a company pension scheme with relief at source. For example, a higher rate taxpayer contributing £8 of taxed income to a pension scheme will get relief at source of £2 approx for basic rate tax and then is entitled to higher rate relief of an additional £2 approx- e.g. see UK income tax relief on pension contributions (higher rate) for an example)

How does a higher rate taxpayer claim the additional higher rate relief? Various guidance online suggests using the self assessent form to claim it, but the self assessment form says not to include pension payments from one's employer made before tax.

Is it automatically processed by HMRC from information provided by the employer (and if so, is there a way to check this has been done correctly?).

Answer 1

This HMRC page explains relief at source. The payment was taken from your pay after tax, not before tax. So the statement about not including it in self-assessment doesn't apply.

This page explains how to claim back the repayment. If you do fill in a tax return (i.e. use self-assessment) then you can and should put it there. If you don't fill in a tax return then you should write to HMRC with the details of the pension payment and ask for the appropriate refund. Note that the refund comes to you, not your pension scheme - the £2 refund reflects the fact that you put in £8 from your net pay initially whereas as a higher rate taxpayer the real net contribution should be £6.

Answer 2

Citywire says:

"If you are contributing to an employer pension scheme which is a final-salary or occupational money purchase scheme, you do not have to worry about claiming the rest of the relief. Your pension pot will automatically receive tax relief of either 40% or 50%."

but doesn't have any reference for that.

More usefully, Which? differentiates between 'net pay' (where all of the reliefs are handled within payroll) and 'relief at source' (where only the 20% relief is handled within payroll and the remainder needs to be claimed within self assessment).

The most useful reference is from the Low Incomes Tax Reform Group. It differentiates between 'net pay' and 'relief at source' schemes but also notes that:

Occasionally, full relief on pension contributions to a net pay arrangement might not be given through the payroll and a claim for relief will need to be made. HMRC’s pensions tax manual explains this.