Pension tax relief question

jem16

berbatov10 wrote: »

I think as you say contribute £6k as HR taxpayer its made up to £0K by tax relief 20/40 %

That would be wrong if you did.

If you contribute £6k it would be made up to £7500, not £10k and you would then claim another £1500 via SA.

You must always think of the gross figure that you want to contribute and pay in 80% of that.

PensionTech

Yep - see my edits above - we've been talking at cross-purposes.

jem16

PensionTech wrote: »

Edit: Ah - I'm with you - you're not talking about the self-assessment amount being deducted from the cost to the member to get to the £10k total cost, whereas I am. If the OP wanted to be £10,000 poorer his pension would be £15,900 richer (because he would contribute £12,720, the 20% £3,180 would go into the pension and he could then claim back the other £2,720 bring the cost back down to £10,000) - that's where I'm coming from.

Sorry but you're still wrong here.

If he contributed £12720 then it would be uprated to £15,900 as you say by £3180 tax relief.

Another £3180 tax relief would then be claimed via SA so his contribution actually cost £9540.

Tax relief is 20% via provider and 20% via SA. It cannot be two different amounts.

berbatov10

Having just played with HL calculator I see that my £11,807 will in fact buy me a contribution of £18,000 to my SIPP. Even better !

PensionTech

The SA would be limited because he would be brought under the HR rate with that (gross) contribution so it wouldn't work out at 20%.


*** Assuming the personal allowance was normal which it doesn't look like it is... so actually he would get even less back via SA

jem16

berbatov10 wrote: »

Having just played with HL calculator I see that my £11,807 will in fact buy me a contribution of £18,000 to my SIPP. Even better !

You won't get 40% tax relief on all of that though. The £11807 is the gross amount that would go into the pension to give you the maximum at 40% tax relief.

You would pay in £9445.60 as I said earlier.

jem16

PensionTech wrote: »

The SA would be limited because he would be brought under the HR rate with that (gross) contribution so it wouldn't work out at 20%.

Ah ok I see where you're coming from now.

Depends on what the OP actually wants to do here. I get the impression he wants to pay in enough to get full 40% tax relief and no more.

berbatov10

Jem spot on I want to pay in max for 40% relief which HL calculator suggests is £11,877

PensionTech

Yep. I assumed he just had £10k to throw into a pension and wanted to know how much tax relief he would get on it. If he just wants to get the 40% tax then I fully agree, he contributes £9445.60, top-up of £2361.40, rebate of £2361.40 so (eventual) cost to him of £7084.20 for a total contribution of £11807.

Got there in the end!

(OP - HL calculator won't be exact in your case because it assumes you have the standard Personal Allowance, which you don't.)

jem16

berbatov10 wrote: »

Jem spot on I want to pay in max for 40% relief which HL calculator suggests is £11,877

£11,807?

Then you pay in 80% to your SIPP - do not pay in the £11807.