When making a claim for pension contributions on a tax return, HMRC automatically apply a basic rate extension to the tax bands to generate relief for higher rate taxpayers. In certain scenarios, making a claim for the basic rate extension is not permitted and, in these instances, you are normally presented with the below message.
If you want to declare the full pension contributions as per your current entries on the return, you can choose to ignore the error and proceed with submission. HMRC will usually notice there is an adjustment needed post submission and process a revised calculation which is sent to the taxpayer in the post. Please note, a revised calculation will only be issued if you are a higher or additional rate taxpayer and therefore if you only fall into the basic rate band, the end result, with or without the adjustment to the pension contribution amount, will remain the same.
If you wish to file the return as HMRC would expect, please click on Summary > SA302 summary and add together the total amount from the below income headings:
Please see HMRC guidance on earnings that attract tax relief for the comprehensive breakdown of all income types.
The minimum amount of pension contributions permitted in the year is £3,600 and you should amend the entry (on the below page) to either £3,600 or the higher value calculated above.
You can then (if required) use the additional information text box to explain a higher value has been paid but relief has been restricted as HMRC require. An example is below for convenience:
If your employment income is £8,000 and you have income from furnished holiday lettings of £3,000, you would add both of these values together to give you net relevant earnings of £11,000. Therefore, the higher of £3,600 and £11,000 is what the return will allow to be validated. You should only be declaring £11,000 on the return as pension contributions as you theoretically cannot input contributions into a pension that you haven't earned in the year.