SIPP Relevant Earnings for a non-taxpayer

PParka

Hi,
Please could someone clarify what counts a 'relevant earnings' for a non-taxpayer?

For example:
I earn £10,000 from my employer, so pay no tax.
Can I still pay £8,000 (net) into my SIPP, which would get £2,000 tax relief making a £10,000 (gross) contribution to my pension?
Is this correct???

I've search the internet, but only seem to be able to find information on £3,600 (gross) contributions for non-earners, rather than non-taxpayers.

Thanks
Parka

BoGoF

Employment earnings are relevant earnings so your example is correct.

Voyager2002

BoGoF wrote: »

Employment earnings are relevant earnings so your example is correct.

I asked HMRC a very similar question. It took a lot of trouble getting hold of anyone who understood the issue, but I can confirm that the quoted answer is what HMRC eventually told me.

Mnd

Have you previously taken any taxable income from a drawdown pension?
If so, you may be restricted to how much you can pay in each year

Audaxer

PParka wrote: »

Hi,
Please could someone clarify what counts a 'relevant earnings' for a non-taxpayer?

For example:
I earn £10,000 from my employer, so pay no tax.
Can I still pay £8,000 (net) into my SIPP, which would get £2,000 tax relief making a £10,000 (gross) contribution to my pension?
Is this correct???

If you are enrolled in a company pension and have contributions to that pension already being deducted from your salary, you would also have to deduct the amount paid annually to that pension from the gross amount that can go into your SIPP.

xylophone

https://www.taxation.co.uk/Articles/2015/06/29/333301/squirrelling-it-away


https://www.taxation.co.uk/Articles/2015/05/05/333016/money-go-round

Mabel’s husband is self-employed and pays her £6,000 a year to maintain his business records, prepare invoices and VAT returns, and deal with enquires at his office.

By ensuring that the work she carries out justifies a salary of more than the National Insurance lower earnings limit, Mabel maintains a contribution record so a full state pension should be payable on retirement.

Subject to the lifetime allowance and the drawdown condition, which is unlikely to trouble Mabel, a worker can make pension contributions up to the level of their earnings or the annual allowance (now £40,000), whichever is the lowest.

In the past, low paid workers may have felt that they had little to gain from making pension contributions. The young and single with limited financial resources will probably still feel this way, but the new flexi-pension regime may have more immediate and short-term attractions.

Mabel could also contribute £2,880 to a personal pension plan and draw down £3,600 a year later. Alternatively, she could contribute up to £6,000 gross to a personal pension plan. She would make a net contribution of £4,800, and the government adds £1,200.

PParka

Thanks for all the replies they're a great help.
I need to tweak my calculations to take into account the company pension contributions, but apart from that it seems like my plan will work.

Parka

okydoky

Worth remembering that if you deprive yourself of this income by investing it in your pension, you might just, depending on your other circumstances, be eligible for working tax credits which could be worth up to c.£4800 per annum👍

Worth investigating.