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  • FIRST POST
    • hall2056
    • By hall2056 11th Mar 17, 7:57 AM
    • 24Posts
    • 6Thanks
    hall2056
    Transfer into SIPPS
    • #1
    • 11th Mar 17, 7:57 AM
    Transfer into SIPPS 11th Mar 17 at 7:57 AM
    Hi, I have 45k in a S&S ISA, and have just opened a Vantage SIPP. As a 40% taxpayer should I be transferring the ISA into my SIPP to maximise 40% tax relief by 05 April?

    Thanks
    Hall2056
Page 1
    • dunroving
    • By dunroving 11th Mar 17, 8:02 AM
    • 395 Posts
    • 144 Thanks
    dunroving
    • #2
    • 11th Mar 17, 8:02 AM
    • #2
    • 11th Mar 17, 8:02 AM
    I have used ISA holdings to fund my SIPP in the past, because at the time it made sense from the perspective of tax relief and using up annual allowance. In reality, the ISA funded my living costs so I could then put my earnings into the SIPP.

    "Be aware of your annual allowance limit first" is the main advice I'd give.
    • Linton
    • By Linton 11th Mar 17, 8:06 AM
    • 7,438 Posts
    • 7,165 Thanks
    Linton
    • #3
    • 11th Mar 17, 8:06 AM
    • #3
    • 11th Mar 17, 8:06 AM
    Have you checked the that you wont breach the limits on how much you can put into a pension? See here section 4. Note that the £40K limit includes employer contributions.
  • jamesd
    • #4
    • 11th Mar 17, 8:19 AM
    • #4
    • 11th Mar 17, 8:19 AM
    Depends how old you are and when you might need the money. If you are or soon will be 55 or older, yes is the likely answer. That may also include as much as your whole pay if you'll soon be 55. In effect it makes at least 25% of your pay tax free.

    Once you reach 55 if still working your can take out the 25% tax free lump sum and leave the rest untaken in the drawdown account that will be set up to avoid the reduction to £4k a year of annual allowance.

    A workaround for the annual allowance restriction is the small pots rule. This lets you take everything out of a pension worth up to £10,000 without triggering the restriction. 25% tax free and 75% taxable. Can be used for up to three pots per lifetime.

    UFPLS is also 25% tax free and 75% taxable but it does trigger the restriction.
    • hall2056
    • By hall2056 11th Mar 17, 8:36 AM
    • 24 Posts
    • 6 Thanks
    hall2056
    • #5
    • 11th Mar 17, 8:36 AM
    • #5
    • 11th Mar 17, 8:36 AM
    Depends how old you are and when you might need the money. If you are or soon will be 55 or older, yes is the likely answer. That may also include as much as your whole pay if you'll soon be 55. In effect it makes at least 25% of your pay tax free.

    Once you reach 55 if still working your can take out the 25% tax free lump sum and leave the rest untaken in the drawdown account that will be set up to avoid the reduction to £4k a year of annual allowance.

    A workaround for the annual allowance restriction is the small pots rule. This lets you take everything out of a pension worth up to £10,000 without triggering the restriction. 25% tax free and 75% taxable. Can be used for up to three pots per lifetime.

    UFPLS is also 25% tax free and 75% taxable but it does trigger the restriction.
    Originally posted by jamesd
    Hi, I am 55 and plan to work full time until I am 60
    • kidmugsy
    • By kidmugsy 11th Mar 17, 10:45 AM
    • 8,975 Posts
    • 5,827 Thanks
    kidmugsy
    • #6
    • 11th Mar 17, 10:45 AM
    • #6
    • 11th Mar 17, 10:45 AM
    Hi, I have 45k in a S&S ISA, and have just opened a Vantage SIPP. As a 40% taxpayer should I be transferring the ISA into my SIPP to maximise 40% tax relief by 05 April?
    Originally posted by hall2056
    That depends on how much of your income is exposed to 40% tax. If, for example, it's £50k then you'd want to contribute £50k gross => £40k net i.e. you wouldn't need the whole £45k because the £40k is the amount you'd hand over to the provider. The £50k is the amount you report to HMRC.

    P.S. I'm assuming that you have sufficient unused relief to carry forward from the previous three tax years.
    • zagfles
    • By zagfles 11th Mar 17, 11:32 AM
    • 11,498 Posts
    • 9,529 Thanks
    zagfles
    • #7
    • 11th Mar 17, 11:32 AM
    • #7
    • 11th Mar 17, 11:32 AM
    This is stating the obvious (though it isn't to some people!), but you only get 40% tax relief on the amount you pay 40% tax on. For instance if you earn £50,000 you can only get 40% tax relief on £7,000 (£50k minus £43k higher rate threshold) gross, put any more in and you'll only get 20% tax relief.
    • Rheumatoid
    • By Rheumatoid 11th Mar 17, 2:12 PM
    • 336 Posts
    • 1,089 Thanks
    Rheumatoid
    • #8
    • 11th Mar 17, 2:12 PM
    • #8
    • 11th Mar 17, 2:12 PM
    This is stating the obvious (though it isn't to some people!), but you only get 40% tax relief on the amount you pay 40% tax on. For instance if you earn £50,000 you can only get 40% tax relief on £7,000 (£50k minus £43k higher rate threshold) gross, put any more in and you'll only get 20% tax relief.
    Originally posted by zagfles
    Yes, and if you are already paying into a scheme or buying added years like me you can knock those off as well. HMRC said they had been advised to make this very clear that it was only on gross taxable pay above 40% threshold when I phoned to adjust my contribution this year.
    Last edited by Rheumatoid; 11-03-2017 at 2:18 PM.
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  • jamesd
    • #9
    • 12th Mar 17, 11:57 AM
    • #9
    • 12th Mar 17, 11:57 AM
    Since you're 55 or older, what I described is useful: as much as you can into pensions to maximise the total amount of tax relief that you get while still working, not sticking just to 40% tax rate part. You could do something like:

    1. Virgin for small pot rule close to £10k in each tax year and out soon after. Say £7,500 net in grossed up to £9375 to stay well clear of £10k limit. Repeat each year for the three years until you have used it as often as the three times per lifetime that you're allowed.
    2. HL for £24k net in, grossed up to £32k then take out £7,500 tax free lump sum and repeat each rolling twelve month period. Or more but stick to £7,500 out per rolling twelve months.
    3. Tell HMRC about the gross of both and they will refund you the higher rate income tax.

    To do both of those you'd need £32,000 + £9,375 of income after deducting the gross of any other pension contributions you're making. You'd also need that much annual allowance available, I've assumed that you have carried forward from the last three years of at least the £1,375 you're going over the annual £40,000 limit by.

    The £7,500 tax free lump sum out per rolling twelve month period is to stay within one of the tax free lump sum recycling limits. The small pot 25% tax free isn't a Pension Commencement Lump Sum and doesn't count for recycling purposes.

    With £9,375 + £7,500 out that'll help you to be able to afford to do it again next year.
    Last edited by jamesd; 12-03-2017 at 12:24 PM.
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