SIPP with 40% tax relief - how to claim

Hi
Looking for some basic guidance. I'm just over the 'Scottish £43Kpa' 40% rate.
2016/7 my salary was circa $44500 and I paid into a company pension at 6%.
I am expecting a couple grand rise and wish to invest monies over £43K in a SIPP to gain the maximum 40% tax relief. Investment will be obviously DD drip fed each month just after salary paid.
Questions are: I understand I need to do a return in January 2018, does this mean I wont get 40% relief each month when paying into SIPP? Do I get standard 20% then the additional later?
I did a bit digging on Google but some conflicting views. So any free 'comments' appreciated.
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Comments

  • greatkingrat
    greatkingrat Posts: 324
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    Yes, the pension company will only claim 20% tax relief. The additional 20% will be paid directly to you (not the pension scheme) by HMRC (or offset against other tax due) as part of your self assessment return. You don't have to wait until January to do the tax return, if you are expecting a refund it is in your interests to do it as soon as possible after the end of the tax year in April.
  • Linton
    Linton Posts: 17,064
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    If you pay 40% taxed money into a SIPP you get 25% (ie the basic rate tax) refunded into the SIPP automatically and you need to claim the rest from HMRC which is paid to you.

    If you tell HMRC (eg by phone) what you are doing they may adjust your taxcode accordingly so you dont pay 40% tax or you can wait until you do your tax return (if you do one) after the end of the tax year and put the information in there. In the latter case you should get a refund and the taxcode should be changed for the next tax year.

    Note that to get (for example) £1K off your taxable pay into your pension you need to actually contribute £800 from your taxed income. The extra £200 comes from HMRC.
  • You claim the extra 20% tax back at the end of the tax year from HMRC and get it by cheque.
  • ColdIron
    ColdIron Posts: 8,902
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    Does your employer offer Salary Sacrifice? If they do your entire untaxed contribution goes into the pension and you don't have to claim anything back. You'll also get a reduction on your NI. Free money, what's not to like?
  • Pugster
    Pugster Posts: 91
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    This is a great thread.

    I have a quick further question.

    My wife, a higher rate tax payer has been paying into a pension for years (5+) but not claimed back the extra relief. Has she lost all of that since she didn't claim. It probably amounts to a good few £ks. Our fault I know, but any way to claim old tax relief?
  • horace972897
    horace972897 Posts: 100
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    Hi, you can claim this back, let them know you've only just realised you can do this and you'd like to correct the mistake you've made.. Just call HMRC and ask for assistance - i've found them to be very helpful.
    I believe there is limit to how many years you can go back but (i think) i went back nearly seven.
  • The rules changed a few years ago and you can now only claim for this year (2017:18) and the previous 4 years.

    She just needs to contact HMRC with the details of her personal pension/sipp contributions (make sure it's clear if she is quoting the net amount she actually paid or the gross amount with the basic rate relief claimed by the pension company).

    You don't get a repayment of the extra tax relief though, HMRC will calculate her overall tax position for each year and compare what she's paid with what she should have paid and refund the difference. Often makes little difference but can for some people.
  • greenglide
    greenglide Posts: 3,301
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    My wife, a higher rate tax payer has been paying into a pension for years (5+) but not claimed back the extra relief.
    Is there actually any relief to claim?

    If it is an employer scheme where the contributions are taken before tax there will be nothing further to claim.

    Generally you only get money back if the 20% is claimed back by the pension scheme and you should see it as a separate item on any statements you get from the scheme.

    What type of pension is it?
  • Random47
    Random47 Posts: 109
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    ColdIron wrote: »
    Does your employer offer Salary Sacrifice? If they do your entire untaxed contribution goes into the pension and you don't have to claim anything back. You'll also get a reduction on your NI. Free money, what's not to like?
    Yes they do. I kinda considered this but was leaning to SIPP as I take control.
    With guidance that I only get the 20% rate paid at time of investment drip feed (or closely after) then have to claim additional at year end which is paid direct to myself or as a tax relief then I might go back and consider salary sacrifice as full amount invested at initial pay deduction.
    Thanks for replies:beer:
  • greenglide
    greenglide Posts: 3,301
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    So you are foregoing the NI reduction simply to "take control"?

    Have you been listening to the brexit lunatics?
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