Reducing Adjusted Net Income

Davieboy24

Hi, I've got the potential in March 2020 to receive a bonus to take me slightly above £100k for adjusted net income after my employer salary sacrifice contributions are taken into account. I plan to make a lump sum payment into a SIPP in March when I receive the bonus.

My query is how simple is it to calculate what this lump sum SIPP pension contribution should be, is it as simple as for example potential adjusted net income £102k, minus £100k, meaning I transfer £2k into a SIPP?

I assume I then need to complete a Self Assessment to ensure the £2k SIPP contribution is taken into account by HMRC?

Dazed_and_confused

meaning I transfer £2k into a SIPP?

If you transfer £2k into a SIPP then the pension company, courtesy of HMRC, will add £500 basic rate tax relief so your gross contribution will be £2,500.

If your adjusted net income ignoring this is £102,000 then it will be £99,500 after taking it into account (£102,000 less £2,500).

I assume I then need to complete a Self Assessment to ensure the £2k SIPP contribution is taken into account by HMRC?

Yes. If you were paying it earlier in the tax year you could get the higher rate tax relief by asking HMRC to take it into account in a revised tax code. However this is only ever provisional and in your circumstances HMRC will always require you to complete a Self Assessment return irrespective of how accurate your tax code was.

Davieboy24

All clear, thanks for the quick response and help.