SIPP Tax Relief and Giftaid

learningmoneybasics

Hi,
If you are adding to a SIPP and wanted to contribute the maximum to match your annual taxable earnings and receive the maximum Tax Relief should you also be factoring in any charity Giftaid tax relief as well? So if there is a "pot" of tax relief I'm able to claim based on the earnings for one year, am I correct in thinking both the SIPP and Giftaid relief would both come from the one "pot"

Dazed_and_C0nfused

No.

Relief at source pension contributions (providing with the contribution limit rules) are unrelated to any tax you actually pay.
Gift Aid relief is dependent on the tax you pay.

For example take someone earning £10,000 (with no auto enrollment pension) and no other taxable income.  They can contribute £8,000 to a relief at source pension and the pension company will add the 25% uplift giving a fund of £10,000 despite no tax being paid.

If that person made a gift aid donation of £400 then the charity would reclaim £100 basic rate tax relief but the individual would get a tax bill from HMRC for £100 as they hadn't paid any income tax to cover the charities tax claim.

zagfles

Good question. I'm not certain so don't rely on this, but my understanding is that RAS pension contributions would be irrelavent, eg if taxable earnings are £15k (ie paying tax of £500 on the £2500 above the personal allowance) and you contribute the max £12k net (£15k gross) to a personal pension, you would still be able to use gift aid up to £2000 net (£2500 gross) of contributions because RAS pension contributions don't reduce taxable income. They reduce "adjusted net income" which would end up negative but don't think that matters.

But if the pension conts were via your payslip and not RAS (ie net pay or sal sac), then taxable income is reduced, and if it goes below the personal allowance then you wouldn't be able to use gift aid.

learningmoneybasics

Thank you both,   I managed to confuse and give myself a headache trying to work it out based on Google searches, but couldn't really find the answer.