Claiming tax relief on sipps?

C_Mababejive

I know this should be simple but it isnt as i dont fully understand it hence this question !

Lets say for the tax year 2017/18 my total gross income from all sources was £60k. (eg paye/investments/interest etc)

I pay maybe £18k into a SIPP.

After a month or so my provider has claimed back 20% relief i.e 3,600.
Am i due some more tax relief and if so, how is it claimed/paid?

Thank you !

Dazed_and_confused

You have misunderstood how the relief at source element works, the pension company would add £4,500 (20% tax relief) not £3,600 (whixh would only be 16.66%).

The gross amount of £22,500 increases the amount of basic rate tax you can pay, which in turn can reduce any higher rate tax payable.

If you complete a tax return then include the details on it.

If not tell HMRC and they will either adjust your tax code (if the payment is for the current tax year) or send you a calculation if the tax year the payment was made in had ended.

When notifying HMRC it is good practice to make it clear what you intend to pay in the next tax year as they often seem to assume the same amount will be paid (which can mean you end up owing tax if it turns out you don't pay as much into the pension).

Any tax refund which ends up being due comes back to you, it is never added to the pension fund.

And HMRC will never adjust the current years tax code for pension payments made in a prior tax year (but they may amend the current tax code to include estimate of pension payments they think you might make in the current tax year as mentioned above).

Twopints

If you pay in £18,000 then £4,500 of tax relief would be added, so you would have a total of £22,500 in the SIPP. If you are a 40% tax payer, then you need to claim the additional tax relief of another £4.500 (20% of £22,500, the gross amount of the contribution).

I did this recently - I sent a copy of the SIPP statement showing the contribution to the tax office and the tax was effectively refunded by an adjustment to my tax code.

AnotherJoe

You tell HMRC that you paid in £22,500 and they either change your tax code for next year or issue a refund.

Dazed_and_confused

You tell HMRC that you paid in £22,500 and they either change your tax code for next year or issue a refund

No, if the payment is made in this tax year (or the previous tax year) they will never give any tax relief due by amending next year's tax code.

Dazed_and_confused

If you pay in £18,000 then £4,500 of tax relief would be added, so you would have a total of £22,500 in the SIPP. If you are a 40% tax payer, then you need to claim the additional tax relief of another £4.500 (20% of £22,500, the gross amount of the contribution)

That isn't how pension tax relief works. There is no automatic right to an extra 20% relief. The gross amount increases the amount of basic rate tax payable and this can reduce the amount of 40% tax payable.

The op hasn't told what their taxable income was in 2017:18 but if we assume it was the £60k mentioned then they may be due pay higher rate tax on a maximum of about 15k (quite possibly much less if the "investments" were dividends taxed at 0%), so the amount of additional tax relief due is never going to be as much as £4,500 simply because the op hasn't paid enough higher rate tax to get that amount of extra tax relief.

Dazed_and_confused

Op, thinking about the way you have worded your original post did you actually make the SIPP payment in 2017:18?? You do realise you cannot back date pension payments?

Lets say for the tax year 2017/18 my total gross income from all sources was £60k. (eg paye/investments/interest etc)

I pay maybe £18k into a SIPP.

After a month or so my provider has claimed back 20% relief i.e 3,600.

Paul_Herring

Twopints wrote: »

If you pay in £18,000 then £4,500 of tax relief would be added, so you would have a total of £22,500 in the SIPP. If you are a 40% tax payer, then you need to claim the additional tax relief of another £4.500 (20% of £22,500, the gross amount of the contribution)

Except you can only claim the extra 20% on the bits that were actually taxed at 40%. Given:

Lets say for the tax year 2017/18 my total gross income from all sources was £60k.

They can only reclaim on (roughly, and assuming a regular tax code, and all the £60K is relevant for pensions purposes) the last £14K (since 40% starts at roughly £46K)

So, around an additional £2,800 (£14*20%), not £4,500 (£22.5*20%)

C_Mababejive

Dazed_and_confused wrote: »

Op, thinking about the way you have worded your original post did you actually make the SIPP payment in 2017:18?? You do realise you cannot back date pension payments?

Lets say for the tax year 2017/18 my total gross income from all sources was £60k. (eg paye/investments/interest etc)

I pay maybe £18k into a SIPP.

After a month or so my provider has claimed back 20% relief i.e 3,600.

In the 2017/18 tax year i paid 18k into a sipp and as you corrected me, i got £4500 tax relief collected by the sipp manager and credited a month or so later.

The bit i am most bewildered about is whether i am due any more tax relief as my total taxable income was circa 60k in that year and if so how is it claimed/paid?? thanks

Dazed_and_confused

You include the details on your Self Assessment return. You do not contact HMRC other than by filing your return and you do not get a separate amount of pension relief refunded to you, it is just part of your overall tax calculation for the year.

If you want to check how much this SIPP payment has saved you in tax (outside of the £4,500 relief at source) then complete (but don't file) your return without the pension contribution and check the tax calculation.

Note the overall tax due/overpaid.

Add in the pension contribution and review the calculation again. The difference between the first and second calculation is how much personal tax relief this has benefited you.

The amount will depend on the make up of your income. It could be as low as £0 or, in extreme cases, more than £4,500 however in your case I would guesstimate that £2.5k - £3k is the sort of figure you will be looking, primarily because you almost certainly havent got enough income to get the maximum benefit.

NoMore

You will be owed approximately 20% tax relief on 15k (so 3k), from your rough figures. As thats the amount over the higher rate tax band you paid tax on. (45k last year, so 60k-45k=15k).

Just call HRMC and tell them your income for 2017/2018, the gross amount you credited to pension and they will sort a refund for you.