Dumb question - SIPP limit and tax relief

dunroving

Sorry folks, not sure if these last few posts were answering my question in Post #16.

But let me have a go at it this way:

In terms of how much pension contribution will be counted against my annual limit (which is "per tax year"):

If I am paid for April 2014 at the end of April 2014, and in that months I paid £1,000 in pension contributions and AVCs, is the whole amount counted towards my 2014-2015 allowance, because the month's salary was paid at the end of April? i.e., even though April 1st-5th were in the previous tax year, payment (and therefore pension contribution) for those days is all counted towards the 2014-2015 tax year?

And if I am paid for April 2015 at the end of April 2015, and in that month I paid £1,000 in pension contributions and AVCs, is the whole amount counted towards my 2015-2016 allowance, because the month's salary was paid at the end of April? i.e., even though April 1st-5th were in the "current" tax year, payment for 1st-5th (and therefore pension contribution) for those days is all counted towards the next (2015-2016) tax year?

Triumph13

Thanks guys, I hadn't realised they used a completely different set of rules for the income test vs the AA test. They do like to make things complicated don't they!


I have a PIP that runs to the end of September but a salary sacrifice agreement that runs on calendar years. Add in a deferred DB element uplifted by RPI vs the CPI in the test and trying to max my AA becomes no end of fun.

zagfles

dunroving wrote: »

Sorry folks, not sure if these last few posts were answering my question in Post #16.

But let me have a go at it this way:

In terms of how much pension contribution will be counted against my annual limit (which is "per tax year"):

If I am paid for April 2014 at the end of April 2014, and in that months I paid £1,000 in pension contributions and AVCs, is the whole amount counted towards my 2014-2015 allowance, because the month's salary was paid at the end of April? i.e., even though April 1st-5th were in the previous tax year, payment (and therefore pension contribution) for those days is all counted towards the 2014-2015 tax year?

And if I am paid for April 2015 at the end of April 2015, and in that month I paid £1,000 in pension contributions and AVCs, is the whole amount counted towards my 2015-2016 allowance, because the month's salary was paid at the end of April? i.e., even though April 1st-5th were in the "current" tax year, payment for 1st-5th (and therefore pension contribution) for those days is all counted towards the next (2015-2016) tax year?

It's the date you're paid, not the period over which you earned the pay. If you look at your payslip you'll see the tax period and gross to date etc which should make it obvious which tax year it counts in.

dunroving

I suppose we should consider ourselves fortunate to have the "problem" of being close to our AA ...

Interesting that in the link to the HMRC, it says:

"You can top up your allowance for the current tax year (6 April to 5 April) with any allowance you didn’t use from the previous 3 tax years."

but ...

"You still only get tax relief on up to 100% of your earnings"

Complicated! So ideally, if I can, I need to calculate how much I will have deducted in pension and AVCs by my employer, deducted that from my total salary, and pay the result into a SIPP in order to get tax relief ....?

So for someone with a salary of £40k, who pays £20k into pension and AVCs via payroll deduction, they should (and are allowed to) pay £16k into a SIPP and get £4k tax relief added by HMRC/SIPP provider?

it's a steep learning curve!

dunroving

zagfles wrote: »

It's the date you're paid, not the period over which you earned the pay. If you look at your payslip you'll see the tax period and gross to date etc which should make it obvious which tax year it counts in.

Thank you - plain and clear, just how I prefer my tax/pension advice!