SIPP cash account credit adjustment

dunstonh

. I was aware that if you have an employer, they pay a percentage into your pension. I was just not sure if that was the case with a SIPP seeing as I'm employing myself.

Are you saying that you are a company director and shareholder of the company?  (as that is the only way you can employ yourself).   Or do you mean you are self employed? (self employed do not employ themselves)

It makes a difference because if it is your own company then you should be making company contributions and not personal contributions.

If you are making company contributions, then you should not be claiming tax relief via the pension.    With company contributions, it is treated as a business expensive and reduces your corporation tax. Plus, you dont pay income tax or NI on that amount to begin with. So, you dont need relief to get it back.

I know bowlhead mentioned similar earlier in the thread but you haven't actually confirmed your status.

BrockStoker

Appreciate all the comments.

Yes, I obviously have some holes in my tax/pension knowledge. Unfortunately I maxed out my ISA last year, so used the SIPP instead.

I am self-employed (I use the term very loosely as I have not worked for may years - but if someone were to come along and offer me generous money for a job I might be prepared to come out of my semi-retirement) rather than a director/share-holder in my own company. In future I will just top up my ISA then.

Thank you again all.

2unlimited91

BrockStoker said:

I am self-employed (I use the term very loosely as I have not worked for may years - but if someone were to come along and offer me generous money for a job I might be prepared to come out of my semi-retirement) rather than a director/share-holder in my own company. In future I will just top up my ISA then.

While you have relevant earnings of nil, or anything under £3,600, you are still allowed to contribute £2,880 to a pension each tax year, to which £720 tax relief is added, giving you £3,600 inside the pension. Your error was in contributing more than that in last tax year. You still might want to contribute the amount you're allowed, in the current and future tax years.

Apart from that, maxing out an S&S ISA is certainly a good idea. But that doesn't have to be where you stop. You can also invest unwrapped cash; it doesn't have to stay as cash, just because it isn't inside a tax wrapper. You should find out a bit about taxes on unwrapped investments, which does make it more complicated, but you'll probably find it's a much more generous tax system than you'd have guessed.

BrockStoker

2unlimited91 said:

BrockStoker said:

I am self-employed (I use the term very loosely as I have not worked for may years - but if someone were to come along and offer me generous money for a job I might be prepared to come out of my semi-retirement) rather than a director/share-holder in my own company. In future I will just top up my ISA then.

While you have relevant earnings of nil, or anything under £3,600, you are still allowed to contribute £2,880 to a pension each tax year, to which £720 tax relief is added, giving you £3,600 inside the pension. Your error was in contributing more than that in last tax year. You still might want to contribute the amount you're allowed, in the current and future tax years.

Apart from that, maxing out an S&S ISA is certainly a good idea. But that doesn't have to be where you stop. You can also invest unwrapped cash; it doesn't have to stay as cash, just because it isn't inside a tax wrapper. You should find out a bit about taxes on unwrapped investments, which does make it more complicated, but you'll probably find it's a much more generous tax system than you'd have guessed.

Thanks for that 2unlimited. (I have the "Twilightzone" vinyl 12" - a little on the commercial side for me - 91 was a great year!)

I really just want to keep things as simple as possible from a tax point of view (not a fan of accounting/filling forms), even if it is not quite as efficient in conserving cash.

It seem I have a new problem now. This is the reply I had from AJ Bell (They deal with IWeb SIPP accounts):

Looking over your account I can confirm that £5,000 credit is the tax reclaim from HMRC for the £20,000 member contribution that was paid into your account on 10 March 2020.

 If this contribution was above your annual earnings for to 19-20 tax year we may be able to refund the difference between your taxable earnings and your initial contribution. To enable us to do this we will require a copy of your P60 from the previous tax year or a copy of your self-assessment tax return.

 Once we are in receipt of this we will be able to confirm if we are able to carry out a refund to you and HMRC.

Unfortunately I don't have a P60 or SA tax return. Not sure what to. Have yet to reply. Any ideas?