Have I Overpaid into my SIPP?

DoDa

In 2019/2020 Tax Year my gross pay was £9,529.34 and I paid £9,529 into my SIPP and received £2,382 tax relief. My understanding was I could pay 100% of earnings into my SIPP and receive tax relief, but having just read another thread I think I may have been mistaken and the maximum I could have paid in was £9,529 including tax relief. This prompts the following questions:
1. Have I made a mistake?
2. What are the consequences of this error?
3. What are my options to rectify the issue?

garmeg

The most you should have paid in is £9,529.34 x 0.8 = £7,623.47

Tax relief will gross this back up to £9,529.34.

You have overpaid by £1,905.87 net.

You need to repay the tax relief on this of £476.47 or ask the pension provider to refund £1,907.87 back to you.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm045000#Refundecls

HMRC will notice that you have overpaid ... eventually.

Consequences? No idea, sorry.

DoDa

The £9,529.34 was for 2-months work and I paid £851.43 NI, so a full year of state pension credit. My SIPP account is showing £2,382.25 tax relief for the pension contribution. I am quite sure now I have made a mistake!

garmeg

DoDa said:

The £9,529.34 was for 2-months work and I paid £851.43 NI, so a full year of state pension credit. My SIPP account is showing £2,382.25 tax relief for the pension contribution. I am quite sure now I have made a mistake!

... is the correct answer. 

jamesd

No problem or penalty. Just tell the pension firm and they will refund the extra £1,905.87 to you.

DoDa

Thank you for your help. I have just send a secure message to interactive investor with my 2019/2020 P60 explaining my mistake and asking for a refund to both HMRC and myself. 

Marcon

DoDa said:

Thank you for your help. I have just send a secure message to interactive investor with my 2019/2020 P60 explaining my mistake and asking for a refund to both HMRC and myself. 

You'd be surprised how often it happens! Far too often websites glibly refer to 'contributing £3,600 or (if higher) 100% of your salary', so it's not surprising people get in wrong.

edwardkenworthy

I appreciate I am two years late to this party but, I am making an assumption given the amount you're paid, if you pay into your SIPP directly from your company then the 100% of earnings rule does not apply. You also save CoTax or Employer's NI.

Also, you can use any unused allowance from the past three years. So you might be able to pay a lot more than just £40K in from your company.

zagfles

edwardkenworthy said:

I appreciate I am two years late to this party but, I am making an assumption given the amount you're paid, if you pay into your SIPP directly from your company then the 100% of earnings rule does not apply. You also save CoTax or Employer's NI.

Also, you can use any unused allowance from the past three years. So you might be able to pay a lot more than just £40K in from your company.

The "100% of earnings rule" is a limit on personal tax relief, you don't get personal tax relief on employer contributions. So it doesn't apply to employer contributions. You need to make sure the SIPP contributions are marked as employer contributions so that the SIPP doesn't claim tax relief. Best check with your accountant that it's a legitimate business expense

dunstonh

I appreciate I am two years late to this party but, I am making an assumption given the amount you're paid, if you pay into your SIPP directly from your company then the 100% of earnings rule does not apply. You also save CoTax or Employer's NI.

Seems unlikely that it is a limited company as the OP said 2 months work and NI was paid.    The primary threshold in 2019/20 was £8632.  So, isn't close to the amount the OP paid.

Apart from that, yes its best for company directors to use employer contributions to pay into the pension.