How do you get tax relief when paying into a Sipp?

bigadaj

bigfreddiel wrote: »

Cheers jem16, so would this then drop me down to the 20% tax band?

And then do I get tax relief of 40% on my SIPP payment?

Cheers fj

Yes, should do. The sipp provider will reclaim the 20% tax relief and you get the additional relief either as a lump sum payment or you can amend your tax code.

jem16

bigfreddiel wrote: »

Cheers jem16, so would this then drop me down to the 20% tax band?

And then do I get tax relief of 40% on my SIPP payment?

Cheers fj

Yes although most of it will be taken up in you not having to pay the extra tax that would be due rather than an actual refund.

zagfles

jem16 wrote: »

£46k - £42k ( £32k higher rate band plus £11k personal allowance ) so £4k gross or £3200 net.

Should be £46k - £43k so £3k gross or £2400 net. But make sure you don't pay higher rate tax at all otherwise your tax free savings allowance drops from £1000 to £500 so get it exact or pay in a bit more to be safe.

jem16

zagfles wrote: »

Should be £46k - £43k so £3k gross or £2400 net.

Thanks - quite correct. Don't know what my brain was doing yesterday!

xylophone

Don't know what my brain was doing yesterday!

I'm blaming it on the heat....:)

bigadaj

jem16 wrote: »

Thanks - quite correct. Don't know what my brain was doing yesterday!

Confused me originally but thought you had already accounted for the savings allowance.

jamesd

zagfles wrote: »

His basic rate band will be extended by his gross contribution to the SIPP, getting him higher rate relief if his total earnings take him into the 40% tax band.

Like jem16 I've also been doing this and it's fine.

In my case it's salary sacrifice so I'm getting this sort of thing:

1. 40% income tax, 2% employee NI saved, 6.9% share of employer NI. This is where my work income is in higher rate band on its own. Total 48.9%.
2. 40% income tax saved, 12% employee NI saved, 6.9% share of employer NI. This is where my work income is in basic rate range and getting that NI rate but where my other income puts my income tax rate still into 40% range. Total 58.9%.
3. 20% income tax saved, 12% employee NI, 6.9% share of employer NI. Both work income and non-work income are now in basic range. Total 38.9%.

4. On top of that I buy VCTs and get 30% relief on those up to my income tax actually paid, eliminating most of the rest of my income tax bill.

Lots of interesting things that can be done provided you know that they exist and have the capital or income to use them.

darkidoe

Getting a headache trying to understand this.

So on my P60 2015/2016, my gross pay less of my superannuation contributions is £43 907. Any worth putting that little bit extra into a private pension at all to gain a boost?

bigadaj

darkidoe wrote: »

Getting a headache trying to understand this.

So on my P60 2015/2016, my gross pay less of my superannuation contributions is £43 907. Any worth putting that little bit extra into a private pension at all to gain a boost?

Yes, but it's too late now.

Believe that huger rate threshold assuming no benefits it's £43385, so you could have put an additional £522 in for 40% tax relief. Your net contribution would have been 20% less, provider would add this on and you'd claim additional 20% through tax return, tax code amendment or a simple call or letter to Hmrc.

Obviously locked away until 55 or later etc etc

darkidoe

bigadaj wrote: »

Yes, but it's too late now.

Believe that huger rate threshold assuming no benefits it's £43385, so you could have put an additional £522 in for 40% tax relief. Your net contribution would have been 20% less, provider would add this on and you'd claim additional 20% through tax return, tax code amendment or a simple call or letter to Hmrc.

Obviously locked away until 55 or later etc etc

Oh does it have to be done within the tax year? So I should start planning for 2016-2017 then. So I can only do the claiming after getting P60 at the end of the year then?