Higher rate tax question

rara32

I currently pay into the LGPS and am a higher rate tax payer.  I am looking to set up a Vanguard SIPP to give me more flexible retirement options and to take me out of the HRT bracket.  I think this means that I need to ensure that I pay into pensions enough to reduce my annual taxable pay to £50k or below. 
So, my annual salary is 60000 and I currently pay £425 per month into LGPS. My current taxable pay to date is circa £36k and per month is circa £4.5k which at the end of the tax year would take me to £54k taxable income so I believe that for the rest of this year (if the SIPP was up and running from December) that I would need to pay at least 4k in to the SIPP.
Does this sound right or have I missed something?

Dazed_and_C0nfused

I would need to pay at least 4k in to the SIPP.

Nearly right.

You would have to pay £3,200 and the pension company would add £800 basic rate tax relief.

This doesn't alter your taxable income but it does increase your basic rate tax band to £41,500.

Your scenario is very simplistic, if you have £1 of other taxable income such as savings interest or dividends you would still be classed as a higher rate payer for some situations even if no higher rate tax was payable.  And if you are a household receiving Child Benefit and have £100 other taxable income you would still have some High Income Child Benefit Charge to pay.

rara32

Thanks for your help and the explanation, much appreciated.

Albermarle

You would have to claim back the higher rate tax relief from HMRC . You only need to contact them to inform them of your gross SIPP contribution .

rara32

Thanks Albermarle would that just be as part of my self- assessment tax return after April or do I need to contact them before?  I've just set up to pay into the SIPP by DD at the moment. 

Dazed_and_C0nfused

You don't need to contact them before, the choice is yours.

But remember any tax relief allowed through your tax code is just provisional, the final position will be established from your Self Assessment return.

You should also be aware that tax relief for pension contributions is only ever due for the tax year you make the contribution in so if HMRC allow tax relief in your 2021:22 tax code it is not tax relief in respect of the contribution you make in 2020:21, it is simply an assumption you will make similar contributions in future tax years.  So important to keep them up to date if things change otherwise you will get an unexpected tax bill.

Albermarle

If you are already filling in a SA form , then probably easier just to include what you have contributed to the SIPP on there .
As Dazed says it will be taken into account when calculating your SA for that tax year. If you are due some tax back they will probably send you a cheque and then as Dazed say adjust your tax code for next year so you will get more net pay and no need for a rebate.