Paying into a SIPP

liketoknow

Thank you, so that means I would get my tax back.


I presume then that if my earnings plus pension went over 11,850, say to 12,000, then I would have to pay tax on the extra but still get the difference between that and the 900 pounds back?

xylophone

See first link above under

Claiming a refund of tax on a PPI payout

liketoknow

Sorry, the posts had crossed. Thank you very much for your help.

Dazed_and_confused

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?

Looks like you understand this now but just to clarify one thing. You are liable to be taxed on the £6,000 in the example you have given above.

But the government has created two tax rates which tax some savings income at a tax rate of 0%

So in your example (where there is no wages/pension income above the Personal Allowance) the tax actually due on the £6,000 of taxable interest is £0.00

liketoknow

Would I not get any back then if my earnings + pension went slightly over then? To say 12000 total?

Dazed_and_confused

If we lump your pension and wages together as £12,000 (they are effectively treated the same for tax purposes) then this would be your tax position for the current tax year,

£12,000 wages/pension
£6,000 interest

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£18,000 total income
£11,850 Personal Allowance

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£6,150 income to be taxed

£150 wages/pension is taxed at 20%
£4,850 interest is taxed at 0% (savings starter rate)
£1,000 interest is taxed at 0% (savings nil rate, known as Personal Savings Allowance)
£150 interest is taxed at 20%

Total tax payable is £60

You would normally have paid about £30 tax under PAYE on the wages/pension so that leaves £30 extra due.

So if you've paid £900 tax on the PPI you would only get a refund of £870.

This all assumes you arent a Scottish resident for tax purposes.

Dazed_and_confused

Basically the more your wages and pension income go over the Personal Allowance then the less of the £5,000 savings starter rate you have available to use.

So if you have £16,850 or more wages/pension you would get none of the savings starter rate.

But would still get the £1,000 nil rate band (known as PSA).

As well as not being Scottish resident for tax purposes this all assumes you haven't applied for Marriage Allowance.

liketoknow

Thank you, No I am single so single person's allowance.
Don't live in Scotland.
Self employed.

No other savings interest.
The PPI interest is 4655.00
I still doubt that my wages and pension combined would push me over the personal allowance but if it did, we are probably only talking 100-200 at the very most.
So hopefully, I would still get most of the 931 pounds back


Thank you very much.

liketoknow

It was a bonus anyway as I was not expecting to get more than a thousand or two back anyway as I didn't pay much in but it did go back to 1999. Even if I don't get any tax back it is still brilliant.


If I put another 3000 - 3500 in the Sipp, I would get it back anyway in tax relief.

Dazed_and_confused

As you're self employed you won't be able to claim a refund now.

You declare the PPI interest (and tax deducted) on your self assessment return and it's taken into account in your overall self assessment calculation for that tax year.

You won't lose out it just means it's down to you when you get the refund - you could in theory file your return on 6 April 2019 but you might leave it to 31 January 2020 - that is what will really determine when you get any refund back.

On the income amounts you have used the PPI tax will almost certainly pay any tax (and National Insurance) due for the year and you will get the balance back.