Tax Relief on Lump Sum money in SIPP

deepam

Hi,

I am getting a bonus from my company and I am thinking of opening a SIPP account. I will be asking my employer to transfer into my SIPP directly so that its tax free

1. Will HMRC top up my contributions with 20%?
2. I suppose I will not get any tax relief because the employer makes gross contribution?

Albermarle

If the bonus is paid gross ( ie untaxed ) into a SIPP , you can not claim any further tax relief.
If the bonus was added to your normal salary and taxed as normal and then the money going into the SIPP came out of your net pay you can claim tax relief.

One problem with the first option is that the SIPP provider may add the 20% automatically and then you would have to pay it back at some time . Not quite sure of the mechanics of this , maybe you could ask the Sipp provider not to add the 20%

Tom99

I doubt your employer can pay a gross bonus into a SIPP. If they can't:-
You pay lets say £1,000 from your net salary into the SIPP
The SIPP provider will claim £250 from HMRC, you may have to wait a couple of months for that depending on the SIPP provider. You will then have £1,250 in your SIPP

If you are a higher rate taxpayer, say 40%, you then claim back £1,250x20%=£250 tax from HMRC so the £1.250 in the SIPP has cost a net £750.

dunstonh

I am getting a bonus from my company and I am thinking of opening a SIPP account. I will be asking my employer to transfer into my SIPP directly so that its tax free

Will they do that? Most won't unless you are senior management level.

1. Will HMRC top up my contributions with 20%?

HMRC dont top up any contributions of any type by 20%.

If the employer does it, it will usually be a gross contribution with your PAYE handling the tax and NI difference. it isnt the only way but the most common way.

Tom99

dunstonh wrote: »

HMRC don't top up any contributions of any type by 20%.

Only by 25%