SIPP, earned income but non tax payer...

claire111

Hi

I am getting very mixed up with SIPP contribution rules despite searching through threads and would appreciate some advice .....

I have personal tax allowance of £10,000. I have part time NHS earnings of £9900 gros.

I have paid the usual 5.6% direct from my salary into NHS pension (£540) and I have also purchased Additional NHS Pension (aka Retirement Annuity Contract) £8900 gros. The annuity purchase is made by me by cheque from my bank account.

So this leaves NHS taxable income of £460, which is covered by my personal allowance.

I also have net rental income of approx £9000, also covered by my personal allowance.

So I currently am expecting pay no income tax when I do my return.

Can I pay £2880 into a SIPP and get £720 uplift like a 'non-earner' even though I do earn ? or is the maximum I can pay in £460 because I have already contributed a total of £9440 to a pension ?


Many thanks to anyone who can advise

Claire

jamesd

Since you have £9900 of earned income you can pay £9900 gross into a pension and receive basic rate income tax relief on the income tax you didn't actually have to pay. Any pension contributions made by salary sacrifice (saving NI potentially) reduce that by the amount of sacrifice.

Your £9,000 of rental income isn't earned income and is completely ignored for pension contributions calculations.

I'm not sure how the 5.6% affects this, I don't know if it's by salary sacrifice or not. If by salary sacrifice you wouldn't have received any income tax relief because no income tax would have been deducted when you were paid anyway.

You start with £9900 available, deduct £540 gross, £8900 gross and that leaves £480 gross available.

If you did all of this and thee was no salary sacrifice you would have received £1980 of basic rate pension tax relief.

You would still have taxable income of the £9900 + £9000. The pension tax relief ends up in the pension so you will still have an income tax bill to pay on the portion of the total income above the personal allowance.

Dunnit

My concern would be the amount you pay towards your additional NHS Pension and 5.6%. If you are not paying tax through your salary are you getting the tax relief on these payments?

jem16

claire111 wrote: »

Can I pay £2880 into a SIPP and get £720 uplift like a 'non-earner' even though I do earn ? or is the maximum I can pay in £460 because I have already contributed a total of £9440 to a pension ?

You would only be able to contribute £460 gross.

jem16

jamesd wrote: »

I'm not sure how the 5.6% affects this, I don't know if it's by salary sacrifice or not. If by salary sacrifice you wouldn't have received any income tax relief because no income tax would have been deducted when you were paid anyway.

NHS pension contributions are paid from gross pay before tax.

You start with £9900 available, deduct £540 gross, £8900 gross and that leaves £480 gross available.

Make that £460.

You would still have taxable income of the £9900 + £9000. The pension tax relief ends up in the pension so you will still have an income tax bill to pay on the portion of the total income above the personal allowance.

Fortunately because of the pension contributions, the OP's taxable income is reduced to £460 plus £9000 rental income and this is covered by her personal allowance so there will be no tax to pay.

So no tax relief as such going into the pension but there doesn't need to be as it's a Defined Benefit pension and she gets the benefit of tax relief via the rental income because of the reduced taxable income.

Dunnit wrote: »

My concern would be the amount you pay towards your additional NHS Pension and 5.6%. If you are not paying tax through your salary are you getting the tax relief on these payments?

She would have been paying tax via the rental income so yes she's getting tax relief but not via her salary.