Annual allowance and tax query

madeinireland_2

Hi,

I understand that this year is special with regards to annual allowance and that we have affectively got two mini tax years within the same tax year - up to 8th July and the rest of the year.

I'm trying to work out the maximum I can contribute to my SIPP this year so as to use up my earnings over the 40% tax bracket.

I have already working out the amount of annual allowance i have left including carry over.

This year I will have earned about £72k. Am I right in thinking that also needs to be divided into £20k for the first mini tax year and £52k for the remainder of the year meaning that I can really only put in about £10k in my SIPP to use up the 40% bracket or can I put in more and utilise some of my income from the earlier part of the year. I didn't make any contribution to my SIPP in the first part of the year although my bonus of £12k went into my company AVC in early JUne which I have not included in the £20k.

In other words I guess my question is - Is income treated like two tax years as well?

Thanks (mr confused)

Pinner_Ram

My understanding is that any contributions made prior to the July budget are ignored and thereafter you have a further £40k allowance for the remainder of the 2015/2016 tax year.


The maximum gross contributions (conts) you may want to make for the July - April part of the 2015/2016 tax year are;


72,000 less gross conts made before budget less personal allowance 10,600 less 20% tax band earnings 31,785.


You may not therefore want to make gross conts of more than £29,615 in total in the period 6 April 2015 to 5 April 2016.

Include any employer pension conts in your gross conts figure.


Hope this helps.


PR

Paul_Herring

Somewhat simplistically:

You had an allowance of £40k for contributions made April 6 '15-July 8 '15 (the date of the budget.)

You have another allowance of £40K for contributions made July 9 '15-April 6 '16.

Unused allowance from the first bit of the tax year cannot be carried forward, either to the second bit, or to future years.


http://www.pruadviser.co.uk/content/knowledge/technical-centre/consultations-budget-autumn-statement/summer-budget-2015/transitional-provisions/

madeinireland_2

Pinner_Ram wrote: »

My understanding is that any contributions made prior to the July budget are ignored and thereafter you have a further £40k allowance for the remainder of the 2015/2016 tax year.


The maximum gross contributions (conts) you may want to make for the July - April part of the 2015/2016 tax year are;


72,000 less gross conts made before budget less personal allowance 10,600 less 20% tax band earnings 31,785.


You may not therefore want to make gross conts of more than £29,615 in total in the period 6 April 2015 to 5 April 2016.

Include any employer pension conts in your gross conts figure.


Hope this helps.


PR

Thanks - if I am reading this correctly then I treat my income for the whole year as a single block rather than two separate chunks which is what confused me

madeinireland_2

Paul_Herring wrote: »

Somewhat simplistically:

You had an allowance of £40k for contributions made April 6 '15-July 8 '15 (the date of the budget.)

You have another allowance of £40K for contributions made July 9 '15-April 6 '16.

Unused allowance from the first bit of the tax year cannot be carried forward, either to the second bit, or to future years.


http://www.pruadviser.co.uk/content/knowledge/technical-centre/consultations-budget-autumn-statement/summer-budget-2015/transitional-provisions/

Completely understand how the allowance bit works - it's the income I was confused about - given £20k of my income was in the first period then if treated as two chunks then it would reduce the income I could invest from my salary in the second period.

Paul_Herring

madeinireland wrote: »

it's the income I was confused about - given £20k of my income was in the first period then if treated as two chunks then it would reduce the income I could invest from my salary in the second period.

Ah - missed that bit. No - your pay doesn't get split pro rata across the two - that's still based on the normal (single-period) tax year.

It's just the allowances that have weird periods this year.

madeinireland_2

Paul_Herring wrote: »

Ah - missed that bit. No - your pay doesn't get split pro rata across the two - that's still based on the normal (single-period) tax year.

It's just the allowances that have weird periods this year.

Thanks for the confirmation as it effectively means I can put in about £20k rather than £10k.

Cheers...