Will I get tax relief on SIPP contributions even if no income tax paid?

silvermum

I work very part time for a family business and get paid £8400 p.a.
Since this is such a low level I don't pay income tax.

I don't need my income to live off and would like to pay it all into my SIPP.

My question is - will I still get tax relief, even though no tax has been paid so e.g. will I just need to contribute £6720?

(I know you can contribute to a pension even if you don’t pay tax, or have no earnings at all. The annual pension contribution limit for non-earners is £3,600 gross - a payment of £2,880 to which the tax man adds £720.)

Pension_Geek

Yes, you can.

silvermum

Ah thanks, that what I thought, but a friend questioned it which got me wondering.

Given that I am pretty much guaranteed to be paid the £8400, and I already have more than this in cash in low interest savings accounts, is there any reason why I can't/ shouldn't make a lump sum payment into my SIPP for the full amount immediately to get it in the market/ get the tax relief and any capital growth?

zagfles

silvermum wrote: »

Ah thanks, that what I thought, but a friend questioned it which got me wondering.

Given that I am pretty much guaranteed to be paid the £8400, and I already have more than this in cash in low interest savings accounts, is there any reason why I can't/ shouldn't make a lump sum payment into my SIPP for the full amount immediately to get it in the market/ get the tax relief and any capital growth?

You can't be sure, anything could happen, you could get ill, the company could go bust etc. However - if you do end up paying too much in, HMRC rules allow you to requst a refund after the end of the tax year, or you can forego the excess tax relief. But check the T&Cs of your SIPP provider to make sure they allow it too.

Paul_Herring

is there any reason why I can't/ shouldn't make a lump sum payment into my SIPP for the full amount immediately to get it in the market/ get the tax relief and any capital growth?

Only the possibility that you won't actually earn that much over the tax year. Otherwise no, there's no reason you couldn't.

xylophone

Remember that you make the payment to a personal pension net.

If you "relevant earnings" are £8400 per annum, you contribute £6720 and the provider claims tax relief of £1680 and adds it to your pot.

Reluctantpensioner

Even with no income you can pay into a pension: up to £2880, which is topped up to £3600 by the govt.