SIPP contribution...a little help needed

crisp

I have opened my SIPP - first year, but I need a little help with the amount I should contribute and get tax relief.

For the year 2010/11, my gross income was £19,414 and my tax £3,575 (all on PAYE).

I understand that the tax is added back to my own contribution. So far I have put aside £13,750 from income and savings to add to my SIPP.

What is the maximum I can place into my SIPP for 2010/11 and get tax relief? Is it £14,300?

thanks

kidmugsy

(1) You may have overpayed tax. I subtracted the Personal Allowance (£6475) from your gross salary and then mutiplied by 0.2, to find that you should have paid tax of £2588. Is there some reason why you would have a tax code that corresponded to a smaller allowance? Be that as it may:
(2) You are allowed to contribute all your earnings i.e. your gross salary. You do that by paying the pension company a net sum (i.e. 0.8 x gross salary), and they claim back the missing 20% from the taxman and add it onto your pension fund. That's a whale of a big relative contribution you are planning: I suppose you have good reason to put quite so much into a pension.
(3) I don't understand where your figure of £14300 came from.

crisp

thanks. I get a pension which is taxable. So I could contribute 0.8 x £19,414 or £15,531?

My £14,300 figure comes from (£14,300 /0.8) - £14,300 = £3,575, which equals the tax I have paid for 2010/11.

any pointers very helpful :-)

kidmugsy

If you mean that your earnings are £15,531, then it's 0.8 x £15,531 that you would be allowed to contribute. Your pension income doesn't count for this purpose.