Can I start a SIPP?

zagfles

boxwood wrote: »

Thank you.

"NI works on a pay period basis, so you need to be careful. For instance any income above the UEL won't count towards the total you need. So if you get paid monthly and earned £7000 all in one month, it would not be a qualifying year for the state pension because only £3863 would count and you need £6032."

I would not earn £7,000 in one month, but I would still like to understand the principle as I may have to do occassional work rather than regular. What is UEL? If my work was 2 or 3 projects a year, paid ad hoc, is there a range I should keep the pay/fee between for the months when I earn so that I make sure I get the NI and the year will count towards State Pension?

See link in post #19, UEL is Upper Earnings Limit.
Basically, for a qualifying year you need to earn at least 52x the weekly LEL ie £6032 - however any earnings in any pay period above the UEL do not count, also any pay period where you earn below the LEL does not count.

So for instance with monthly pay, £7000 in one month would not make a qualifying year (since only £3863 would count).

Also £500 a month for 6 months and £1000 a month for the other 6 months would not make a qualifying year either, since none of the £500 months would count as below the LEL, only 6x£1000 which is less than £6032.

boxwood

Thanks again zagfles, you have been very helpful.

I have read the link and your explanation, and I think I understand.

So to get a Qualifying Year for State Pension, and get the NI conttibution without actually having to pay it, my salary must fall between the Lower Earnings Limit (LEL) and the Primary Threshold (PT) on a pro rata monthly or weekly basis, i.e. a total income for the year between £6,032 and £8,424 is not the overall criteria. What matters is that if my salary is paid monthly, it must be between £503 and £702 per month. Is this the point?

As there is only 5 full months (or 6 including this month) remaining in this financial year, does this mean I cannot work the remaining months between now and April and earn enough to get my NI and a Qualifying Year without having to pay it? I would have to be paid more than the monthly Primary Threshold to earn enough to get beyond the annual Lower Earnings Limit.

xylophone

The HMRC site used to say the same!

It doesn't now...

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm024200

Members of registered pension schemes can make unlimited contributions to those schemes in a tax year but there is a limit on the amount of contributions that will receive tax relief based on:

the greater of £3,600 and the amount of the member’s relevant UK earnings, and the annual allowance.

But the Gov site still muddies the waters....

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

If you do not pay Income Tax

You still automatically get tax relief at 20% on the first £2,880 you pay into a pension each tax year (6 April to 5 April) if both of the following apply to you:

you do not pay Income Tax, for example because you’re on a low income
your pension provider claims tax relief for you at a rate of 20% (relief at source)

boxwood

Am I too late this year to have a Qualifying Year for State Pension in the income band that means I don't have to pay NI?

To get a Qualifying Year for State Pension (and get the NI conttibution without actually having to pay it) my salary must fall between the Lower Earnings Limit (LEL) and the Primary Threshold (PT) on a pro rata monthly or weekly basis, i.e. a total income for the year between £6,032 and £8,424 is not the overall criteria. What matters is that if my salary is paid monthly, it must be between £503 and £702 per month. Is this the point?

As there is only 5 full months (or 6 including this month) remaining in this financial year, does this mean I cannot work the remaining months between now and April and earn enough to get my NI and a Qualifying Year without having to pay it? I would have to be paid more than the monthly Primary Threshold to earn enough to get beyond the annual Lower Earnings Limit.

crv1963

Before you go paying NI double check that you are not already being credited for them by virtue of your disability benefits?

boxwood

I don't claim any benefits. That was another member with a question on this thrsad.

crv1963

boxwood wrote: »

I don't claim any benefits. That was another member with a question on this thrsad.

Apologies.

boxwood

No problem.

My question again:

Am I too late this year to have a Qualifying Year for State Pension in the income band that means I don't have to pay NI?

To get a Qualifying Year for State Pension (and get the NI conttibution without actually having to pay it) my salary must fall between the Lower Earnings Limit (LEL) and the Primary Threshold (PT) on a pro rata monthly or weekly basis, i.e. a total income for the year between £6,032 and £8,424 is not the overall criteria. What matters is that if my salary is paid monthly, it must be between £503 and £702 per month. Is this the point?

As there is only 5 full months (or 6 including this month) remaining in this financial year, does this mean I cannot work the remaining months between now and April and earn enough to get my NI and a Qualifying Year without having to pay it? I would have to be paid more than the monthly Primary Threshold to earn enough to get beyond the annual Lower Earnings Limit.

zagfles

You might be able to claim to be annually paid but you really need to talk to your accountant - I posted the rules for ordinary employees but I think there are rules about directors (and possibly spouses of directors) to stop manipulation of salary to minimise NI.

boxwood

zagfles wrote: »

You might be able to claim to be annually paid but you really need to talk to your accountant - I posted the rules for ordinary employees but I think there are rules about directors (and possibly spouses of directors) to stop manipulation of salary to minimise NI.

Thank you again.

I think I understand the principle now, and will take the approach that if I am paid monthly I need to ensure my monthly income is between £503 and £702.

There was one thing in an earlier post, I keep looking at the figures and tables on the link you posted, but I cannot understand this point made earlier:

So if you get paid monthly and earned £7000 all in one month, it would not be a qualifying year for the state pension because only £3863 would count and you need £6032.

I understand the £6,032 is needed. But I don't see where the figure £3,863 comes from. How is that arrived at as the amount out of £7,000 that would "count"? I've tried subtracting it from £7,000 to see if the non-"counting" part makes it clearer and still can't see where the figure comes from. If I paid £7,000 all in one month, wouldn't just £702 be the maximum that could "count" in any one month? I know it's not going to make a difference to the advice (very much appreciated again thank you) but it's annoying me I can't see how that figure is arrived at.