Paying into a SIPP

liketoknow

I have a cash SIPP with Hargreaves Lansdown. last year I put 3000 pounds in and got tax relief of 750pounds.


I have got a refund of some PPI so would like to invest more as it seems to be better than earning interest by investing it.
Am I right in thinking I can only invest up to the amount I have earned? I am on a low income as I am semi retired.
I won't know what my income will be until the end of the tax year.

Mnd

Yes, that is correct

Alexland

Yes but remember that limit includes the HMRC contribution. So if your Relevant Earnings for the tax year are £10,000 you can contribute £8,000 and the SIPP provider would claim £2,000.

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

Also consider if any contributions might be occurring in your workplace pension if applicable.

Alex

Dazed_and_confused

I have got a refund of some PPI so would like to invest more as it seems to be better than earning interest by investing it.
Am I right in thinking I can only invest up to the amount I have earned? I am on a low income as I am semi retired.
I won't know what my income will be until the end of the tax year.

Assuming you have received some taxed interest as part of the PPI payout you are likely to be due a refund of some of the tax deducted.

You can have upto £17,850 interest in the current tax year before any tax is actually payable - this will be lower for you as a result of any taxable wages or pension income but could still mean you are due a tax refund.

squirrelpie

I have a cash SIPP with Hargreaves Lansdown. last year I put 3000 pounds in and got tax relief of 750pounds.

I have got a refund of some PPI so would like to invest more as it seems to be better than earning interest by investing it.
Am I right in thinking I can only invest up to the amount I have earned? I am on a low income as I am semi retired.
I won't know what my income will be until the end of the tax year.

Contrary to what others have said, I believe the answer may be no.


In general you can only invest what you have earned in each tax year, but everybody can invest up to £2880 net (which is grossed up to £3600 by HMRC) regardless of what they have earned. So if you are on a very low income, you can still invest that much.

liketoknow

Dazed_and_confused wrote: »

Assuming you have received some taxed interest as part of the PPI payout you are likely to be due a refund of some of the tax deducted.

You can have upto £17,850 interest in the current tax year before any tax is actually payable - this will be lower for you as a result of any taxable wages or pension income but could still mean you are due a tax refund.

Up until last year I wasn't earning enough to be paying tax but then I was really ill and my income dropped to a level I was struggling with my bills. I had deferred my state pension but as a result of not being able to work for a while, I decided to claim it.
With my wages and the pension added on, last year I fell into the realms of having to pay a small amount of tax.
This year, my earned income has reduced so that even with the pension, I would have been just under the personal allowance figure. The PPI payout had got interest added and as a result, they stopped over 900 pounds tax.

When you say that 'You can have up to £17,850 interest in the current tax year before any tax is actually payable', does that mean that I will get that 900+ pounds tax back or am I misreading that?


Thank you all for your help.

xylophone

The PPI payout had got interest added and as a result, they stopped over 900 pounds tax.

See

https://www.litrg.org.uk/latest-news/news/140217-have-you-recently-received-cheque-having-been-mis-sold-ppi

With regard to how much may be paid into the SIPP, this depends on the amount of your "relevant earnings". Pension income is not relevant earnings.

For example, if an under 75's only non savings income was his part time wage of £5000 a year and a pension of £6850 , and his only other income was interest of £6000 on his savings, he would pay no tax.

Nevertheless, because he earned £5000, he could pay £4000 into a personal pension and receive tax relief of £1000.

If he had no relevant earnings, he could still pay up to £2880 into the personal pension and the provider would claim £720 from HMRC and add it to his pension pot.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me

xylophone

You can have up to £17,850 interest in the current tax year before any tax is actually payable',

If a person's only income in this tax year was interest of £17850 on his savings, he would pay no tax because he would be covered by his personal allowance of £11,850, the starting rate on savings interest (£5000) and the personal savings allowance (£1000).

liketoknow

xylophone wrote: »

See

https://www.litrg.org.uk/latest-news/news/140217-have-you-recently-received-cheque-having-been-mis-sold-ppi

With regard to how much may be paid into the SIPP, this depends on the amount of your "relevant earnings". Pension income is not relevant earnings.

For example, if an under 75's only non savings income was his part time wage of £5000 a year and a pension of £6850 , and his only other income was interest of £6000 on his savings, he would pay no tax.

Nevertheless, because he earned £5000, he could pay £4000 into a personal pension and receive tax relief of £1000.

If he had no relevant earnings, he could still pay up to £2880 into the personal pension and the provider would claim £720 from HMRC and add it to his pension pot.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me

Sorry, you lost me on the example - if he earned 5,000 a year (sorry, my pound sign isn't working), and got a pension of 6,850 - which would be similar to mine - why wouldn't he have to pay tax on the 6,000 interest?


My earnings plus pension would probably be slightly under the personal allowance. I recieved under 5,000 in interest and paid 931 pounds in tax.

xylophone

A person earns £5000 and receives a pension of £6850.

The Personal Allowance is £11,850 so he pays no tax on the above.

He receives interest of £6000 on his savings.

This is covered by starting rate on savings interest (£5000) and the personal savings allowance (£1000).

xylophone

See also

https://www.gov.uk/apply-tax-free-interest-on-savings