Deduction and Allowances

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A pension contribution made in the following tax year is brought back to the current tax year but no deduction appears in the computation. Why?

Under the SA system pension contributions brought back from the following year are not given as direct deduction to the tax computation. The amount of relief is given by a kind of tax credit.

For example, a gross premium of £1,000 carried back is worth £400 to a higher rate taxpayer. This amount (400) should be entered as an amount of 'tax you are reclaiming now' in box 18.9 on the tax return.
This will act like a credit on the client's account.

The amount must be computed manually. Treat the amount as if the client has paid an amount towards his or her next balancing payment or payment on account.

Payments made after 6/4/2001 or any employee contributions prior to that date are paid net of basic rate tax.

Therefore additional relief applies only to higher rate taxpayers. For example a higher rate taxpayer making a contribution of £780 net (in 2001-2002) will be entitled to another £180 tax relief.

To enter the tax you are reclaiming now select Tax code & Underpaid/Overpaid/Repaid from the miscellaneous data entry menu.

The amount entered will not affect the computation of the tax due for the year (box 18.3) or the payments on account, if applicable (box 18.6).

From 6/4/2006 it is no longer possible to carry back pension contributions made in the following year into the current tax year.

Married Couples Allowance has been transferred to the Wife/lower earning partner but it still appears on the clients return. Why?

Married couples allowance may be transferred from the husband/higher earning partner to the wife/lower earning partner if his income is too low to utilise part or all of it.

The amount of allowance must be entered manually. Enter it in the first of the two amount fields on the Married Couple - Transfer of Allowance screen. Make sure that the amount transferred does not exceed the amount unused in the computation.

If unsure, run the tax computation without transferring the allowance; the amount shown as unused can be transferred.

Also make sure that the amount transferred does not exceed the amount allocated to the husband/higher earning civil partner.

In other words if half the allowance has already been allocated to the wife/lower earning partner, only half may be transferred to the wife/lower earning partner.

How is Widows Bereavement Allowance (WBA) claimed?

It is claimed automatically in the year and year following the husband's death.

Ensure that his date of death has been entered on the Name screen on the client maintenance menu.

If the husband has not been entered, his date of death may be entered at the bottom of the marital status screen (also on the client maintenance menu).

Note that WBA is abolished from 6/4/2000 onwards. Widows who's husband died in the year ending 5/4/2000 may claim WBA for the 2001 tax year.