SIPP Contributions & Tax Relief

colinjd

Morning,

Moving into 2015 I intend being much more proactive with a SIPP I have but I'm a little confused about the tax relief available, being a higher-rate tax payer.

As an example - and keeping the numbers simple - if I wanted to make a gross contribution of £100 I would only have to pay £80 with the remaining £20 coming from tax relief, but as a 40% higher rate tax payerI could claim back an extra £20 via self-assessment.

My question is, what happens to this additional 20% tax relief after I've completed the self-assessment? Is it refunded to me as a one-off tax rebate or is an adjustment made to my personal tax code so I pay less tax? Or maybe it's paid direct into my SIPP, where my original contribution was made?

Not having been a higher rate payer until recently this isn't something I've thought about before but has got me wondering now, so thanks for any advice.

jem16

colinjd wrote: »

My question is, what happens to this additional 20% tax relief after I've completed the self-assessment? Is it refunded to me as a one-off tax rebate or is an adjustment made to my personal tax code so I pay less tax?

It can be either but the more likely is an adjustment to your tax code.

Or maybe it's paid direct into my SIPP, where my original contribution was made?

No it's never paid into the Pension. Always think of the gross amount you want in the pension and pay that in.

Deneb

colinjd wrote: »

As an example - and keeping the numbers simple - if I wanted to make a gross contribution of £100 I would only have to pay £80 with the remaining £20 coming from tax relief, but as a 40% higher rate tax payerI could claim back an extra £20 via self-assessment.

Don't assume that you have to complete self-assessment just because you are a HRT payer and contributing to a SIPP.

https://www.gov.uk/check-if-you-need-a-tax-return

The first year I started contributing to a SIPP, I phoned HMRC and explained that I intended making contributions each year sufficient to negate my HRT liability. I received an amended tax code by return and each year since my tax code notice has been automatically calculated on the assumption that I will continue to make contributions into a pension to at least that level.

colinjd

Deneb wrote: »

Don't assume that you have to complete self-assessment just because you are a HRT payer and contributing to a SIPP.

https://www.gov.uk/check-if-you-need-a-tax-return

The first year I started contributing to a SIPP, I phoned HMRC and explained that I intended making contributions each year sufficient to negate my HRT liability. I received an amended tax code by return and each year since my tax code notice has been automatically calculated on the assumption that I will continue to make contributions into a pension to at least that level.

That's really useful, thanks. Apart from my SIPP contributions there's no other reason for me to complete a self-assessment so it seems as if a simple phone call to HMRC might be sufficient.