Self-assessment confusion re: personal pension

[Deleted User]

We have 31406 plus 15957 - 9500 = 37863
Less personal allowance 11000 = 26863
Tax due 5372.60
Plus tax retained on pension 1900 = 7272.60
Less paid 4079 = 3195.60

Or not using this method:
31406+15957 = 47363
Less personal allowance 11000 =36363
Tax due: 7272.60 less paid 4079 = 3195.60

You only needed to put 3490 into your pension (made up to 4363) to avoid higher rate tax

Dazed_and_confused

the way I was looking at it, every time the form asked me a question, I answered it and gave the information requested

What happened when it came to using your P60 details in the subsequent calculation.

You can't deduct your SIPP payments, they just increase the amount of 20% tax you can pay (which of course reduces any 40% tax payable).

[Deleted User]

Dazed_and_confused wrote: »

the way I was looking at it, every time the form asked me a question, I answered it and gave the information requested

What happened when it came to using your P60 details in the subsequent calculation.

You can't deduct your SIPP payments, they just increase the amount of 20% tax you can pay (which of course reduces any 40% tax payable).

He added his P60 figure to his personal allowance and declared this - see his latest post.

Dazed_and_confused

Sorry realise that, was meaning how could he get that so wrong when he was faithfully following the instructions elsewhere!

dunroving

The amount I entered on my SA form was the same as the amount on my P60 (£31,406). I didn't add my personal allowance on my SA form. I was just using that to illustrate my by-hand calculations of income tax due.

[Deleted User]

dunroving wrote: »

I didn't add my personal allowance on my SA form. I was just using that to illustrate my by-hand calculations of income tax due.

But you did on post 10 in your calculation

dunroving

Dazed_and_confused wrote: »

the way I was looking at it, every time the form asked me a question, I answered it and gave the information requested

What happened when it came to using your P60 details in the subsequent calculation.

You can't deduct your SIPP payments, they just increase the amount of 20% tax you can pay (which of course reduces any 40% tax payable).

[Deleted User] wrote:

He added his P60 figure to his personal allowance and declared this - see his latest post.

Dazed_and_confused wrote: »

Sorry realise that, was meaning how could he get that so wrong when he was faithfully following the instructions elsewhere!

[ignore italicised section]

I seem to have added confusion in my explanation of what I did, and my provision of my by-hand calculations, so maybe I should edit my explanations of my by-hand calculations as:

"Scottish resident (don't think that affected anything in 2016-2017, though) Tax code S1100L
Taxable income from my P60 as an employee: £31,406. This amount entered in my SA tax return.
PAYE tax paid: £4,079
Taxable overseas pension income: £15,957
SIPP contributions (gross, including the 20% HMRC refund): £9,500

My calculations are as follows:
Total taxable income = £31,406 from employer + £15,957 from pension = £47,363.
Subtract £9,500 SIPP contribution = £37,863 that is subject to tax. Tax is due on the first £32,000 at 20% (£6,400) and due on the remaining £5,863 at 40% (£2,345), i.e., I owe HMRC £8,745 in income tax.

My outstanding tax due to HMRC therefore is £8,742 or thereabouts minus £4,079 PAYE tax already paid = £4,666 outstanding tax due for 2016-2017."

- so regardless of how I present it (by adding, and then subtracting, the personal allowance, or by simply not including the personal allowance in my calculations), I get the same answer, which is different than what HMRC tells me.

The part that I bolded also confuses me slightly.

I guess if I entered my taxable income correctly, from my P60 (Yes), my PAYE tax paid correctly, from my P60 (Yes), my overseas pension income correctly (Yes), and my SIPP contributions correctly (Yes), then I just trust HMRC's calculator to be correct. These are the only amounts I have entered into my SA tax form.

Dazed_and_confused

Whilst clearly keen to understand you are somewhat overcomplicating things and whilst you stuck to simplicity in completing the return that appears to have gone out of the window now!

You cannot claim a deduction/allowance for payments to a SIPP.

They simply increase the amount of 20% tax you can pay, they don't reduce your actual income which needs to be taxed.

Taxable pension income £47363
Less Personal Allowance £11000
Income on which tax needs to be paid £36363

Basic rate tax on £36363* = £7272.60
Less PAYE tax paid £4079
Amount still payable £3193.60
*more than £32000 due to the SIPP

That seems very close to the figure in your original post.

Had you not contributed to the SIPP at all the calculation would have been

Taxable pension income £47363
Less Personal Allowance £11000
Income on which tax needs to be paid £36363

Basic rate tax on £32000 = £6400.00
Higher rate tax on £4363 = £1745.20
Total tax payable = £8145.20
Less PAYE tax paid £4079
Amount still payable £4066

So in addition to the basic rate tax relief the pension company added to your SIPP payment (£1900?) you have also saved yourself another £872.40 in a lower self assessment bill.

Dazed_and_confused

In simple terms you were a higher rate payer but the SIPP contribution brought you back to being a basic rate payer.

dunroving

Dazed_and_confused wrote: »

In simple terms you were a higher rate payer but the SIPP contribution brought you back to being a basic rate payer.

Yep. I'm slow, but I'm getting there. I just managed to access the "View your calculations" page of the SA tax return and it is starting to sink in. ;-)

Believe it or not, I am a former (recently retired) teacher of statistics, but for some reason I am still unable to figure out, I seem to be numerically dyslexic when it comes to tax issues.