Timing of SIPP contributions for freelancer?

torus

I work freelance but usually know a few months in advance what my invoices will be. I pay the full amount of my earnings into my SIPP each year (accounting for the government's tax relief being added). Can I pay into this year's SIPP now on the assumption my invoices will be what I expect or do I have to wait until I have sent out those invoices?

Ultimately, what if I did pay into the SIPP now and then wasn't able to invoice for Feb and Mar for whatever reason? Would I be penalised for paying more into the SIPP that I earned in the tax year (and claiming the government's tax relief) or would it be sorted out in my tax return?

zagfles

torus wrote: »

I work freelance but usually know a few months in advance what my invoices will be. I pay the full amount of my earnings into my SIPP each year (accounting for the government's tax relief being added). Can I pay into this year's SIPP now on the assumption my invoices will be what I expect or do I have to wait until I have sent out those invoices?

Ultimately, what if I did pay into the SIPP now and then wasn't able to invoice for Feb and Mar for whatever reason? Would I be penalised for paying more into the SIPP that I earned in the tax year (and claiming the government's tax relief) or would it be sorted out in my tax return?

I seem to remember a useful HMRC page on this but they seem to have moved everything to gov.uk and dumbed it all down to practically useless.

From what I remember I don't think you can sort it out on your tax return, you need to tell the SIPP provider. I think some have in the T&Cs that you shouldn't pay in more than 100% of earnings.

TheTracker

torus wrote: »

I work freelance but usually know a few months in advance what my invoices will be. I pay the full amount of my earnings into my SIPP each year (accounting for the government's tax relief being added). Can I pay into this year's SIPP now on the assumption my invoices will be what I expect or do I have to wait until I have sent out those invoices?

Ultimately, what if I did pay into the SIPP now and then wasn't able to invoice for Feb and Mar for whatever reason? Would I be penalised for paying more into the SIPP that I earned in the tax year (and claiming the government's tax relief) or would it be sorted out in my tax return?

Assuming I understand the question accurately and that you freelance trough a limited company, your company must have the funds available to pay you the pension contribution, and available means after taking into account certain creditors. Certainly if you pay a dividend and consume otherwise earmarked corporation tax is illegal ("ultra vires") so I imagine same for pension contributions. If you use accounting software like FreeAgent they usually tell you the amount the company has available for distribution. There is an MSE Small Biz forum (f=27) where helpful accountants hang out, you'd be better to ask there.

If you don't have a company then I'd imagine the answer is no. Could be wrong.

kidmugsy

Could you not make some small "pilot" contribution now, and then phone at the last minute and make the balance of your contribution using your debit card?

ozzage

TheTracker wrote: »

Assuming I understand the question accurately and that you freelance trough a limited company, your company must have the funds available to pay you the pension contribution, and available means after taking into account certain creditors. Certainly if you pay a dividend and consume otherwise earmarked corporation tax is illegal ("ultra vires") so I imagine same for pension contributions. If you use accounting software like FreeAgent they usually tell you the amount the company has available for distribution. There is an MSE Small Biz forum (f=27) where helpful accountants hang out, you'd be better to ask there.

If you don't have a company then I'd imagine the answer is no. Could be wrong.

I read it the same way, but it's based on the assumption that you're paying company contributions through a limited company.

There is nothing stopping you running your company at a loss, so you can pay whatever pension contributions you like, but if (as mentioned above) you are also paying dividends then you can be in trouble, as you MUST NOT distribute dividends except out of profit. That does not include "expected profit" so you will break the law if you distribute dividends when you're currently not making a profit for the year.

If you are paying personal (employee) contributions and not using a limited company then that's a whole other answer, so might be best to get clarity on that first.

torus

Thanks for the replies - my work very part-time so no company set up. Will probably just wait until after end of the tax year and do them to keep it simple.