£2880>£3600

zagfles

uk1 wrote: »

Goldiegirl,

My understanding is that you open a personal pensions account with one of the providers and deposit £2880. "Shortly afterwards" the account is credited with the tax element to make your total balance £3600. As a non tax payer you will receive the first 25% tax free and the balance taxed automatically at the basic rate which you will then reclaim via a tax return. If you haven't used the online system it is surprisingly easy to use.

Jeff

If you take regular periodic payments from the SIPP you should get a tax code and if it's correct you shouldn't need to do a tax return, if you're not due to pay tax you won't. It's just like having an income from a job as far as PAYE goes.

uk1

zagfles wrote: »

If you take regular periodic payments from the SIPP you should get a tax code and if it's correct you shouldn't need to do a tax return, if you're not due to pay tax you won't. It's just like having an income from a job as far as PAYE goes.

Thanks. That may be the way it works for some or should work, but I have several pension sources, but only one uses my tax code, all the others seem to take either no tax or tax at 20%.

Jeff

jamesd

jerrysimon wrote: »

PS can you do this if when already draw your pension ? I guess not as you would be recyling though I think I read somewhere that you can up to 7.5K ?

Yes. The 7500 is one of the things that excludes something from being covered by the rule limiting recycling, it is 7500 in a rolling twelve month period of tax free lump sums.

It is also useful to know that HMRC has yet to apply the rule to any individual.

jamesd

Goldiegirl wrote: »

If I deposited the £2880, is a lump sum just added to bring the amount up to £3600? I assume there's a question in the application process, so they'd know I was a non tax payer?

There is no question, they just add basic rate tax relief to all contributions by individuals.

Bigger insurance companies tend to add the relief immediately, others can wait until about two thirds of the way through the month that the money was paid in, which is about when they get the money from HMRC.

Goldiegirl wrote: »

If I wanted to do a draw down, would anything in in excess of the 25% be paid to me with tax deducted and I'd have to claim it back from HMRC?

Initially yes but if you were to do it in regular monthly payments HMRC would have time to get a tax code to the pension provider that would tell them not to deduct income tax. Their next payment would include a refund of the overcharged tax.

In cases where a refund is needed the target time from application to payment if the correct form is used at a Personal tax Account online is 30 days.

Goldiegirl

jamesd wrote: »

There is no question, they just add basic rate tax relief to all contributions by individuals.

Bigger insurance companies tend to add the relief immediately, others can wait until about two thirds of the way through the month that the money was paid in, which is about when they get the money from HMRC.

Initially yes but if you were to do it in regular monthly payments HMRC would have time to get a tax code to the pension provider that would tell them not to deduct income tax. Their next payment would include a refund of the overcharged tax.

In cases where a refund is needed the target time from application to payment if the correct form is used at a Personal tax Account online is 30 days.

Thank you, that's clarified things in my mind

itsanne

This thread has been very useful so thank you to all who have responded even though it's not mine.

I have a related question stemming from Goldiegirl's. I have 'given' my tax allowance to my husband. Will that make any difference to how things work?

zagfles

itsanne wrote: »

This thread has been very useful so thank you to all who have responded even though it's not mine.

I have a related question stemming from Goldiegirl's. I have 'given' my tax allowance to my husband. Will that make any difference to how things work?

Not if your total taxable income, including what you take out of the SIPP, doesn't exceed your new lower allowance after the 10% is taken off.

itsanne

zagfles wrote: »

Not if your total taxable income, including what you take out of the SIPP, doesn't exceed your new lower allowance after the 10% is taken off.

If I put the £2880 in and it then counts as taxable income, even without it becoming £3600 I would no longer be a non taxpayer (current pension roughly £10,000).

zagfles

itsanne wrote: »

If I put the £2880 in and it then counts as taxable income, even without it becoming £3600 I would no longer be a non taxpayer (current pension roughly £10,000).

So you'll pay tax on it if you take it out. Well 75% of it anyway, you get 25% tax free. See above, still a gain.

But you don't have to take it straight out, the govt have promised to increase the PA to about £12500 IIRC, so in future you might have some PA spare even with the MA transfer. So if you can wait before taking it out...

jamesd

itsanne wrote: »

If I put the £2880 in and it then counts as taxable income, even without it becoming £3600 I would no longer be a non taxpayer (current pension roughly £10,000).

Since the current personal allowance is £11,000 and only £2,700 of the pension money is taxable this means that you would be subject to income tax on £1,700 of the money. So for your £2,880 paid in you would get out £900 + £1,000 + £1,700 * 0.80 = £3,260, a gain after tax of £380.