Exceeding annual allowance!

LULULU1

My wife is part time in a supermarket so could you advise how much of her pay she could pay into a SIPP please. She has no other income. She is unlikely to earn more than £12,500 thus year.

Gross £1024

NI £44
Work Pension £61
Tax £0
Union Fees £6

Net Pay £913.


I assume she can pay in the whole of the £913 if she wises.

Many thanks for any help

zagfles

LULULU1 wrote: »

My wife is part time in a supermarket so could you advise how much of her pay she could pay into a SIPP please. She has no other income. She is unlikely to earn more than £12,500 thus year.

Gross £1024

NI £44
Work Pension £61
Tax £0
Union Fees £6

Net Pay £913.


I assume she can pay in the whole of the £913 if she wises.

Many thanks for any help

She can pay in gross 100% of her earnings. Net contribution is 80% of that, so it's a lot less than £913 a month.

Assuming the union fees aren't tax deductible (most aren't but some are), if the works pension is a "net pay" scheme, it'll be 1024-61= 963 gross, ie 770 net.

If the works pension is a RAS scheme (where the scheme claims tax relief), you'll need to gross it up so 61 is 76.25 gross. So 1024-76.25 = 947 gross = 758 net approx.
But it's done on an annual basis so it's the amount over the year that matters.

If you don't know whether it's a net pay or RAS scheme, look at how the "taxable to date" increases from one payslip to the next. Is it gross or gross minus pension. If it's gross minus pension then it's net pay.

HarryGray

jamesd wrote: »

No, it's tripe. A "refund of excess contributions lump sum" has no penalties attached, you just get the overpayment returned to you. The person just didn't know enough to give you a correct answer.

I suggest that you salary sacrifice down to minimum wage if you like. The difference between your eventual after sacrifice gross pay and your personal contributions is the gross excess contribution and you'll get 80% (all but the tax relief) back from SL as a refund of excess contributions lump sum. The extra sacrifice is better for you and just increases your refund due to the lower after sacrifice gross pay.

You don't contact HMRC, the pension company does, and pays you the refund.

You're not in any sort of trouble, just relax and do what makes sense then ask SL for the refund, telling them your P60 gross pay. Use the "refund of excess contributions lump sum" magic words to help point them in the right direction. It's routine, just not particularly common.

I did think about just carrying on as normal and doing loads of salary sacrifice from now until the end of tax year. However, I have worked out that if I do 8% (my employer matches 8%), 16% from now until the end of the year would take me to about £39,500 total pension contributions for the tax year. So I can't go over this as I don't want to go over the AA.

LULULU1

The taxable to date has gone up from £890 last month to £1031 this month.

Thanks

HarryGray

LULULU1 wrote: »

The taxable to date has gone up from £890 last month to £1031 this month.

Thanks

Would you be able to start you're own thread with your issue?

LULULU1

Yes apologies....

jamesd

HarryGray wrote: »

16% from now until the end of the year would take me to about £39,500 total pension contributions for the tax year. So I can't go over this as I don't want to go over the AA.

The gross value of the refunded amount doesn't count towards the AA. If that still doesn't make enough room you can carry forward unused annual allowance from the past three years.

The annual allowance charge isn't particularly horrible, it just adds the excess to your after sacrifice pay so you'd owe basic rate tax on it. If the charge is at least £2,000 you can use scheme pays to have it paid out of your pension pot, else you do it - unless they volunteer - with after tax and NI money that hurts more.