Effective date for pension payments

[AleisterCrowley]

For tax purposes when is a pension payment viewed to have been made?
When it appears on my payslip, or when the transaction shows up on the pension provider's 'transactions' page?
There seems to be a c 2 week lag between the payslip and the money appearing in the pension account, so my March payslip shows ££££ pension payment, but L&G show the payment in early April
My assumption is that the annual allowance for contributions (£40k?) runs 6 April-5 April. March payments randomly arrive either side of 5/6 April

[pje16]

My normal pay day is 28th, and my monthly contribution shows about 10 days later
As far as HMRC are concerned it is a deduction on that month's pay

[AleisterCrowley]

Thanks - is that actually stated anywhere on the HMRC site?
To further confuse matters there's an option to have one's annual bonus paid into pension. This would normally appear in the March payslip, but isn't recorded if direct to pension. I've had two appear in one tax year on the L&G transactions report (March 2021 on 6th April 21, and March 2022 on 5th April 22...)

[pje16]

Thanks - is that actually stated anywhere on the HMRC site?
To further confuse matters there's an option to have one's annual bonus paid into pension. This would normally appear in the March payslip, but isn't recorded if direct to pension. I've had two appear in one tax year on the L&G transactions report (March 2021 on 6th April 21, and March 2022 on 5th April 22...)

If we do that (annual bonus) we have the option to add it to salary sacrifice, so it DOES go to my pension.
Guess it depends on your employer

[AleisterCrowley]

Yes, I do that as sal sac, but from memory it's not on the payslip in March, it just appears on the L&G records in April (but will check)

[pje16]

I think it depends on when your employer adds it to your pay

[Alaric]

I think it depends on when your employer adds it to your pay

If the pension contributions are deducted by the employer, doesn't the P60 effectively tell you which year any tax calculation relates to?

Doesit make a difference as to whether tax offsets are PIRAS or "net pay"? Certainly if the latter, the P60 would surely be the guide.

[pje16]

If the pension contributions are deducted by the employer, doesn't the P60 effectively tell you which year any tax calculation relates to?
Yes it should do – mine does
Does it make a difference as to whether tax offsets are PIRAS or "net pay"? Certainly if the latter, the P60 would surely be the guide.

not sure what PIRAS is, sorry
any pension (or sal sac) comes off gross pay

[Alaric]

not sure what PIRAS is, sorry

Pension Income Relief At Source. It's the system where the pension holder pays a net 80 to the provider and HMRC pays 20 to the provider a few weeks later. The gross contribution is 100. If higher rate tax is involved, the extra relief has to come through a PAYE code adjustment or Tax Return.

https://www.accountingweb.co.uk/any-ans ... k-required

[pochisoldi]

For me, pension contributions are made on the earliest of the following dates
On pay day, where shown on a payslip (regardless of salary sacrifice, deducted before tax or deducted after tax)
When the payment is shown as made on the account is is going out of.

The following "events" get ignored:
The date the money gets handed from employer to pension provider
The date the money gets invested in the target assets or purchased investments get settled (because in both cases the money is already in the pension scheme).

The key thing is that you are consistent from one year to the next. "Consistent" means you apply the same rules (even if you feel like you are making them up) every year.

Note that a P60 doesnt help here - that only shows what you have been paid through out the year.
The last payslip for the financial year may be helpful if it shows cumulative contributions.

I'm not going to dig out any HMRC manual references - as these only required for "edge cases" e.g. a direct debit for a contribution that usually goes out on the 5th, but doesnt get taken until the 6th because the 5th fell on a Sunday, or an online payment made by card on Saturday 4th that doesnt go through until Monday 6th.

[pje16]

.
Note that a P60 doesnt help here - that only shows what you have been paid through out the year.
The last payslip for the financial year may be helpful if it shows cumulative contributions.

A P60 should have the same information as a month 12 payslip

[AleisterCrowley]

My payslip has PTD and YTD (period and year to date) totals - but I can't find the downloaded March 22/21 .. Doh!
Re bonus - this is the words..
Any pro-rata bonus will be paid in March 2023 so tax period 12, final payslip

[pochisoldi]

.
Note that a P60 doesnt help here - that only shows what you have been paid through out the year.
The last payslip for the financial year may be helpful if it shows cumulative contributions.

A P60 should have the same information as a month 12 payslip

A P60 may, or more likely will not contain the same info as the last payslip of the tax year.

I have just dug out my P60 for 2021/22
It shows:
Pay and tax deducted in previous employments
Pay and tax deducted for this employment (A)
and the following paid "in this employment"
NICs: Earnings below LEL, Earnings between LEL and PT, earnings between PT upto UEL, NICs paid (B)
Statutory <x> Pay (where <x> is Maternity, Paternity, Adoption, Parental Bereavement, Shared Parental)
Student loan deductions
Post grad loan deductions

My final/Month 12 payslip shows the following under the "Year to date" heading:

Total Gross Pay - not shown on P60 (=Gross pay less before tax deductions)
Gross for tax - tallies with (A) above
Tax deducted - tallies with (A)
Earnings for NI (doesnt tally with B as it covers all NI'able pay in one figure, not split out as per P60)
NI deducted - tallies with (B)
EE Pension - not shown on P60 (Employees contribution)
Employers NI - not shown on P60
ER Pension - not shown on P60 (Employers contribution)

[Adamski]

Hi there, my understanding... For this month's pay - the payslip will be dated 31st Jan. This is paid across to the pension provider in early Feb, and the pension provider claims basic rate tax relief (of 20%) on my personal contributions in Feb.

The effective date for both employee contribution and tax relief is January. The total amount to put on the tax return = personal contributions paid to the scheme + the basic rate tax relief.

[pochisoldi]

Hi there, my understanding... For this month's pay - the payslip will be dated 31st Jan. This is paid across to the pension provider in early Feb, and the pension provider claims basic rate tax relief (of 20%) on my personal contributions in Feb.

The effective date for both employee contribution and tax relief is January. The total amount to put on the tax return = personal contributions paid to the scheme + the basic rate tax relief.

Why does it make any difference whether a contribution is treated as paid in January or February?

The tax year ends April 5th.

Contributions made in January or February fall into the same tax year regardless.

For the record, every pension provider I've used over my working life (that comes to around 5 providers so far) has automatically grossed up the contribution (where required) and bought units on the day that the money hits the account.

So for "relief at source" for every £80 net contribution paid in £100 worth of units is bought.
For salary sacrifice pensions (tax not deducted from payroll therefore no relief at source) £100 of contributions buys £100 of units.
In both cases the units get bought on the day the provider gets their money, and I treat the contribution as made, when the money is taken off me (either by direct debit from my account, or deducted by payroll).

[Alaric]

For the record, every pension provider I've used over my working life (that comes to around 5 providers so far) has automatically grossed up the contribution (where required) and bought units on the day that the money hits the account.

I think a SIPP run by an online Broker would not credit the tax relief until they get it. That's how ii work anyway.

[pochisoldi]

For the record, every pension provider I've used over my working life (that comes to around 5 providers so far) has automatically grossed up the contribution (where required) and bought units on the day that the money hits the account.

I think a SIPP run by an online Broker would not credit the tax relief until they get it. That's how ii work anyway.

I've never had a SIPP, but I wouldn't be surprised if all SIPP providers did that, at least with any ad-hoc/lump sum type contribution (rather than a "regular savings plan"/direct debit contrib.).

[eisman]

AleisterCrowley asked

For tax purposes when is a pension payment viewed to have been made?
When it appears on my payslip, or when the transaction shows up on the pension provider's 'transactions' page?
There seems to be a c 2 week lag between the payslip and the money appearing in the pension account, so my March payslip shows ££££ pension payment, but L&G show the payment in early April
My assumption is that the annual allowance for contributions (£40k?) runs 6 April-5 April. March payments randomly arrive either side of 5/6 April

For regular contributions paid via an employer's payroll under a net pay arrangement (or personal contributions made direct to the pension scheme administrator under a direct debit arrangement), the general rule is that the deemed date of payment is the date the deduction is made from your pay (or the date the DD authority specifies, even if actual payment is late because the due date falls on a weekend or bank holiday).

For 'one-off' contributions (which includes a bonus paid into the pension scheme under salary sacrifice), the date of payment is the date the pension scheme administrator receives the payment.

The date of payment for a contribution made under Relief at Source is the same as a payment the member makes direct. For example the date authorised to draw money by direct debit from the employer’s bank account or the date the employer’s cheque is received.

See HMRC Pensions Tax Manual PTM041000:
https://www.gov.uk/hmrc-internal-manual ... /ptm041000

Utilisation of the annual allowance is measured by reference to contributions paid in the 'pension input period' ending in the tax year. Apart from the initial year of a new scheme, the pension input period is indeed now on a 6 April - 5 April basis (prior to 8 July 2015 it wasn't always on that basis). See HMRC Pensions Tax Manual PTM052100
https://www.gov.uk/hmrc-internal-manual ... /ptm052100

Eisman

[AleisterCrowley]

Many thanks, I will have a read
Having checked, I think my main problem is going to be getting accurate info re annual contributions for the three year carry forward- which side of the tax year line they fall on is probably immaterial
My payslips were provided online (Oracle self service) and I seem to have gaps in my downloaded records (it was all done in a rush due to taking VR with an end date 31 December..) Plus my employer switched pension providers a couple of years ago to complicate matters further