SIPP and earnings from employment or inheritance
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Shadweller
Posts: 19 Forumite
If in any given tax year you receive an inheritance and also earnings, is there any reason why you can't put more of your earnings than usual into the SIPP, and declare them as earnings? Even though the reason you can suddenly afford to do that is because of an inheritance?
There is a bit of a delay in receiving my tax relief and I'm beginning to worry that something has gone wrong. I always thought you could put up to 100% of your earnings into a SIPP and declare it as income from employment. And so receive tax relief. I have put the money from my inheritance to other uses.
Have I done anything wrong?
TIA.
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Comments
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You can certainly put up to your earnings into a pension and live off an inheritance. It can take a couple of months for the tax relief to be creditedI’m a Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
& Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
All views are my own and not the official line of MoneySavingExpert.1 -
You don't get to decide what is relevant earnings that's defined by HMRC.
However, Money is fungible, it doesn't matter where it comes from.
For Pension contributions tax relief, what matters is your overall tax position, it doesn't matter if you pay from your Salary or use Savings/Inheritance instead, as long as you don't claim more tax relief than you would be due, which is based on your relevant earnings (which in the majority of people cases is their Salary).
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NoMore said:
For Pension contributions tax relief, what matters is your overall tax position, it doesn't matter if you pay from your Salary or use Savings/Inheritance instead, as long as you don't claim more tax relief than you would be due, which is based on your relevant earnings (which in the majority of people cases is their Salary).This is what I thought. Thank you for confirming.I just had a moment of panic due to it seeming to be taking considerably longer than normal for my tax relief to come through on my pension deposits.0 -
Shadweller said:If in any given tax year you receive an inheritance and also earnings, is there any reason why you can't put more of your earnings than usual into the SIPP, and declare them as earnings? Even though the reason you can suddenly afford to do that is because of an inheritance?There is a bit of a delay in receiving my tax relief and I'm beginning to worry that something has gone wrong. I always thought you could put up to 100% of your earnings into a SIPP and declare it as income from employment. And so receive tax relief. I have put the money from my inheritance to other uses.Have I done anything wrong?TIA.
You cannot add 100% of your earnings and get basic rate pension tax relief.
You can add 100% of your earnings inclusive of the basic rate pension tax relief.1 -
Let's say your relevant earnings are £40,000 a year and you are under age 75.
Under normal circumstances, your gross contribution (post tax contribution plus tax relief) per tax year across all pension
arrangements is £4000.
For example,
£2400 from post tax salary to workplace pension plus £600 tax relief = £3000
£800 to SIPP plus £200 tax relief = £1000
A windfall of £50,000 drops into your bank account.
You pay £28,800 into the SIPP and the provider claims £7,200 TR and adds it to your pot.
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There is a bit of a delay in receiving my tax relief and I'm beginning to worry that something has gone wrong. I always thought you could put up to 100% of your earnings into a SIPP and declare it as income from employment. And so receive tax relief. I have put the money from my inheritance to other uses.
The SIPP provider has no idea about your personal circumstances, earnings etc.
They just add basic rate tax relief to whatever contributions you make ( after a delay as they wait to get the money from HMRC). So the onus is on you not to add more than you should. Otherwise down the line HMRC will pick up on it.
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Thanks for the replies. It seems that I should be absolutely fine. The weird thing is that I have a huge queue of pending tax relief contributions going back to January I think. I hear something is meant to happen on or around the 22nd of each month, so if nothing happens then or soon after I will chase up as to what is going on.It could work out to my advantage as it looks like the funds may be coming off their peak of the last couple of months. And so I may get them cheaper if / when I eventually do.....0
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