Most tax efficient way for SIPP contributions?

Newnoel

My wife is the sole director in a Personal Service Company, which hasn’t had any revenue for the past few years as she has been raising our kids full time. There is currently a carried forward Corp tax loss of approx. £5k.

She has taken on a small piece of work recently to the value of £2.5k. All is in the current tax year.

She wants to use this cash to make a one-off pension contribution to her SIPP. There will be no other pension contributions during the year, and she has no other sources of income.

What is the most tax efficient way to do this?

Is it:

a)       Withdraw £2.5k as a dividend / PAYE and pay it into the SIPP. With basic-rate tax relief this will make a total contribution of £3k

b)      Let her employer pay directly into the SIPP on her behalf?

c)       Other?

 

Thanks

pjread

No other income?  Seems odd you wouldn't want to at least PAYE up to NI threshold or tax allowance.

Is this 2.5K one-off and this is a micro/hobby business?  The way you worded it make me think so.  If this is it, I'd be inclined to take it out PAYE then make an individual contribution to a SIPP if that's what you want to do with it, as it'll get grossed up regardless of lack of income tax paid (to a limit, I think it was £2880/£3600 gross at one point but worth checking/someone correcting me).