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Pension Tax Relief Rules - Previous Years

In 2010/2011 I was a higher rate tax payer and earnt £65K, of which I paid £6.5K (gross) into my SIPP getting tax relief at 40%. Since then I have been standard rate tax payer receiving 20% tax relief on my pension contributions.

This year I estimate I will earn £53K and again will be a higher rate tax payer. I wish to make a £25K contribution into my SIPP which will exceed my 40% taxable income band for 2014/2015.


Am I allowed to split the £25K SIPP contribution over different tax years such that I can claim 40% tax relief against 2010/2011 for £14K and 40% tax relief against 2014/2015 for £11K? If I can how do I do this?
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Comments

  • Aegis
    Aegis Posts: 5,695 Forumite
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    No, your contribution only allow you to claim tax relief on income earned in the year the contribution is made.
    I am a Chartered Financial Planner
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
  • jem16
    jem16 Posts: 19,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    DoDa wrote: »
    In 2010/2011 I was a higher rate tax payer and earnt £65K, of which I paid £6.5K (gross) into my SIPP getting tax relief at 40%. Since then I have been standard rate tax payer receiving 20% tax relief on my pension contributions.

    This year I estimate I will earn £53K and again will be a higher rate tax payer. I wish to make a £25K contribution into my SIPP which will exceed my 40% taxable income band for 2014/2015.


    Am I allowed to split the £25K SIPP contribution over different tax years such that I can claim 40% tax relief against 2010/2011 for £14K and 40% tax relief against 2014/2015 for £11K? If I can how do I do this?

    No you cannot do this. Tax relief is based only on the year in which you make the actual contribution.
  • Snakey
    Snakey Posts: 1,174 Forumite
    I agree with the others. You can no longer carry contributions back. I have a vague memory that once upon a time you could relate contributions back into the previous tax year, but these were old rules that have long gone.

    When you hear people talking about bringing forward unused relief, they are talking about the maximum limits for getting tax relief. These are not relevant to you at the level of contribution you are making, and would not get you additional higher rate relief even if they did apply. Your only hope is to earn more money this tax year!
  • DoDa
    DoDa Posts: 49 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    Thanks for the quick reply.

    I was looking into this on advise of a friend who was made redundent into Aug 2011 and had a £90K payoff, went travelling for 2 years and then made a payment into their SIPP in Dec 2013 getting tax relief against 2011/2012 at 40%. They then started working again in 2014 and assumed that I could do similar. How come they were able to do this if the rules changed some time ago?
  • Aegis
    Aegis Posts: 5,695 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    DoDa wrote: »
    Thanks for the quick reply.

    I was looking into this on advise of a friend who was made redundent into Aug 2011 and had a £90K payoff, went travelling for 2 years and then made a payment into their SIPP in Dec 2013 getting tax relief against 2011/2012 at 40%. They then started working again in 2014 and assumed that I could do similar. How come they were able to do this if the rules changed some time ago?
    You couldn't do that in December 2013, so either he is misremembering (or badly describing) facts or he has inadvertently claimed tax relief to which he is not entitled.
    I am a Chartered Financial Planner
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
  • Snakey
    Snakey Posts: 1,174 Forumite
    I work in tax (although not personal tax or pensions) and sometimes it feels like my working day is full of people who have been told by friends, friends-of-friends, family members, taxi drivers, people down the pub, golfing buddies etc that they can do all these wonderful things. Sometimes you wonder why anyone ever pays any tax as it's apparently so easy to get around!

    Get your friend to show you the professional advice he took, which he should have got in writing from his adviser and which will explain in detail why relief is available and what steps need to be taken. Or if he's a tax specialist and came up with this himself, get him to write down exactly what you have to do and how it works. Everyone here is always keen to learn something new.

    If there was no such advice/expertise, well, the enquiry window is still well and truly open for anything that took place in the 2013/14 tax year (I doubt he's even submitted his tax return yet). I'd wait and see whether he actually gets his 40% relief before envying him too much.
  • DoDa
    DoDa Posts: 49 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    I am glad I don't employ snakey as my tax advisor!


    I have just spoken to HM & Revenue PAYE & Self Assessment department and I can make a retrospective pension payment for the 2010/2011 tax year and claim back my higher rate tax as I described my friend doing in my original post.


    So I will split my £25K SIPP payment between the 10/11 and 14/15 tax years ensuring I get 40% tax relief on the full amount.
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 1 August 2014 at 12:04PM
    Just what did you ask HMRC to get that answer out of them?

    There is an annual allowance for pension contributions. If you don't fully use it and were in a pension scheme, this unused part carries forward and can be used up to three years later. You can use that if you want to go over this year's £40,000 limit, provided you have more than that in earned income this year as well, because the cap is the lower of the allowance available or earned income.

    As Aegis, jem16 and Snakey wrote, you can't make contributions for past tax years after the tax year has ended. You can do things like using that unused allowance or correcting an error in what you told HMRC, though.

    There are quirks related to pension input periods which mean that it is not strictly three tax years but rather three pension input period years. This can allow carrying forward the unused annual allowance a bit longer than three tax years, as much as almost four whole years. Similarly, a pension contribution now if your pension input period for last year hasn't ended could count against last tax year's allowance, not this years. But you can't go back far enough this way so it doesn't provide a solution to your problem. There are also some quirks that allow pension input periods to be longer than twelve months but not as long as two years.

    You can greatly reduce the potential for penalties and interest charges from HMRC by sending them a letter that clearly states that in the current tax year you are making a payment into a pension that you are applying to the 10/11 tax year's return and are claiming back higher rate relief for the 10/11 tax year based on the payment you have made this year. HMRC is supposed to notice and not charge penalties if you have clearly informed them what you have done.
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