I've recently got a tax coding notification through from HMRC, which shows various allowances and deductions leading to a non-standard personal allowance, and hence a non-standard tax code for the year. The deduction part I understand, but I'm struggling to work out how to turn my pension contributions and gift aid donations into the same numbers as shown on the form.

As I understand it, if I make a donation to a charity and gift aid it, the charity is able to claim back the basic rate tax, while I need to claim back the difference between the basic rate and the higher rate myself. Similarly, for contributions I myself make to a personal pension after tax, the pension provider claims back the basic rate, and I need to claim the difference to higher rate. (This all assumes I earn enough to pay some higher rate 40% tax, but under 100,000 so there's no loss of personal allowance, and no additional rate tax).

For the sake of round numbers, assume I contribute £1,000 in a year to a personal pension, and donate £100 to charity. I believe that with those numbers, £1250 would end up in my pension (after the basic rate relief), and the charity would get £125.

In that situation, what numbers should be showing up as extra allowances on my tax coding notice, what would my new personal allowance end up being, and hence what tax code should I then be on?

1 Answer 1


So with those numbers, the extra money you are "owed back" is:
£250 for the higher rate relief on the pension contributions
£25 for the higher rate relief on the Gift Aid
= £275.

So your personal allowance will be increased by an amount meaning you pay £275 less basic rate tax. Since basic rate tax is 20% your allowance is increased by £1375 (275 * (1/0.2)).

If we're talking about 2012/2013, the personal allowance is £8,105 (tax code of 810L) so your allowance would change to £9480 and a tax code of 948L.


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