SIPP tax relief

Worried_of_wakefield

Hi Guys, whilst I've read and re-read the hefty thread on this subject, my DB LS has arrived this morning, I thought I would double check I'm doing the right thing

I don't work, I'm not drawing my db pension until Jan 2019, I'm living off savings no other income
This tax year I still have a large percentage of my personal tax allowance to use up.

If I understand correctly I can add £2880 into a SIPP and in a couple of months HMRC will add a further £720.
a) Have I got it right?
b) is £2880 the max figure I can add?
c) if I buy shares with the £2880 and it increases/decreases, does this matter?
d) Can I do the same for my wife ( part time, no other income, earns below personal tax allowance)

Cheers in anticipation

BoGoF

a) Yes
b) Yes, as you have no earnings
c) No
d) Yes, but if her earnings are above £3,600 she can pay up to the level of her earnings.

Worried_of_wakefield

Thanks BoGoff

d) Yes, but if her earnings are above £3,600 she can pay up to the level of her earnings.

dont get this bit, can you provide an example

greatkingrat

If her earnings from her part-time job are say £5000 a year, she could pay in up to £5000, instead of £3600.

dunstonh

Worried_of_wakefield wrote: »

Thanks BoGoff



dont get this bit, can you provide an example

If she earns £2,000 then she can pay £3.600 into a pension.

If she earns £4,000 then she can pay £4,000 into a pension.

Pension contributions are treated as gross. Not net.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/74986613#Comment_74986613

You didn't answer post 8.

xylophone

https://www.hl.co.uk/pensions/tax-relief/calculator

Put her details in the above.

For example, let's suppose she has relevant earnings of £8000 and wants to contribute the £8000 to a personal pension.

She would pay £6400 into the pension and the pension provider would claim £1600 from HMRC and add it to her pot.

Worried_of_wakefield

All, Ah! now I get it!!

Thanks Xylophone

For example, let's suppose she has relevant earnings of £8000 and wants to contribute the £8000 to a personal pension.

She would pay £6400 into the pension and the pension provider would claim £1600 from HMRC and add it to her pot.

This is getting intriguing, so the whole of this years earnings ( £10k ) which she paid monthly into our account ,your saying by utilising my LS she can open a SIPP in this tax year £8000 nett and enjoy £2k from HMRC. The old phrase if it sounds too good to be true it probably isn't come's to mind.
And as I understand it she can draw it all out at the start of the new tax year? ( remembering HL charges however) and start again

You didn't answer post 8.

No she doesn't have a pension, however given that my LS was tax free and it now sits in a joint account with the rest of our assets do I still have to officially 'gift' her £x to open her a new SIPP or is it simply just do it

xylophone

It is possible to make a contribution to somebody else's pension.

However, why not just transfer the relevant sum to her sole bank account?

She can then open the personal pension for herself and make the contribution by debit card.

She might then wish to continue to make contributions in future tax years as best suits her personal circumstances from the sole account.

AlanP_2

Worried_of_wakefield wrote: »

And as I understand it she can draw it all out at the start of the new tax year? ( remembering HL charges however) and start again

Beware of the Money Purchase Annual Allowance (MPAA) restrictions.

If you take even 1p of "taxable" income, so over and above the 25% TFLS, then you are limited to paying in a maximum of £4k going forwards.

There are special rules if you access "small pots" of less than £10k I think without triggering MPAA but I'm not sure of all the details.

Dazed_and_confused

This is getting intriguing, so the whole of this years earnings ( £10k ) which she paid monthly into our account ,your saying by utilising my LS she can open a SIPP in this tax year £8000 nett and enjoy £2k from HMRC. The old phrase if it sounds too good to be true it probably isn't come's to mind.
And as I understand it she can draw it all out at the start of the new tax year? ( remembering HL charges however) and start again

But that would suggest she will continue earning £10k in which case she would be liable to tax on half the withdrawal.

£2,500 of the £10k would be TFLS.

£2,500 covered by unused Personal Allowance (subject to there being no other income not so far disclosed and no Marriage Allowance claim exists)

£5,000 taxed at basic rate (assuming not Scottish resident for tax purposes).