Non earner SIPP contributions

plastimoney

Hello,
Is it possible to set up a SIPP for a non earner and contribute £2800 for this financial year and also use carry forward to contribute £2800 for the three preceding tax years.2011/2012, 2012/2013, 2013/2014.

The non earner was also a non earner for these earlier years.

(Apologies if this has been covered elsewhere on the forum)

Aegis

No, the £2,880 is a statutory amount on which you can reclaim basic rate tax for a non-earner. It is not linked to the annual allowance and therefore cannot be carried forward.

davide691

Even if you could use the carry forward, the SIPP would have needed to be up and running in the year for which you’re contributing

plastimoney

Thanks for the swift answers.
So the best option is to start now in this financial year and continue in subsequent tax years.

kidmugsy

plastimoney wrote: »

Thanks for the swift answers.
So the best option is to start now in this financial year and continue in subsequent tax years.

Yes. And such is my advice to my wife.

chucknorris

Am I correct in thinking that after I retire next year, if I invest £2,880 into my SIPP, I will only be able to obtain 20% rather than 40% tax relief, because I cannot claim the additional 20% as I will not have any 'earned' income?


If this is the case, it isn't going to be worth investing further in my SIPP, because it doesn't make sense to only get 20% tax relief paying in, but being taxed 40% (net 30% after the TFLS) when taking money out of my SIPP.

jem16

chucknorris wrote: »

Am I correct in thinking that after I retire next year, if I invest £2,880 into my SIPP, I will only be able to obtain 20% rather than 40% tax relief, because I cannot claim the additional 20% as I will not have any 'earned' income?

That is correct.

jamesd

I think that is not correct and that you will receive higher rate income tax relief. HMRC increases your basic rate band by the gross amount of your pension contribution. that would increase it by 3600 and that in turn will deliver you the higher rate relief.

Earned income is irrelevant for the amount of relief that you get, that's based on total income from all sources.

jem16

jamesd wrote: »

I think that is not correct and that you will receive higher rate income tax relief. HMRC increases your basic rate band by the gross amount of your pension contribution. that would increase it by 3600 and that in turn will deliver you the higher rate relief.

Not according to HL. http://www.hl.co.uk/pensions/interactive-calculators/tax-relief-calculator

Non-taxpayers - non-taxpayers receive basic rate tax relief. For those without earned income, the maximum payment is £2,880 to which the taxman adds £720, to make a total gross contribution of £3,600.

Earned income is irrelevant for the amount of relief that you get, that's based on total income from all sources.

Tax relief is limited to 100% of earnings so if no earnings then that's £0 tax relief available. (apart from the basic rate relief on the £3600)

sacko1305

Is the 2880/3600 not increased each year for inflation?

jem16

sacko1305 wrote: »

Is the 2880/3600 not increased each year for inflation?

Not so far.