Previous years unused pension

spock007

Hi, 

I very quickly want to shelter some cash from CGT via investing. I have already used my £40k pension limit this year but the three years prior still have gaps of up to £10k all-in. 

Am I ok to open a SIPP with Hargreaves to put £10k in despite having paid £40k in to my work pension this year? Do I need to notify HMRC and how do I get the 21% (Scotland) back? 

Thanks

Dazed_and_C0nfused

There is no set extra 21%.

A relief at source pension contribution simply increases the amount of your basic rate tax band so any additional personal tax benefit, on top of the tax relief added to your pension fund, depends on your overall tax position.

How much will your pensionable earnings be in the current tax year?

And yes, any extra tax relief due comes back direct to you and you would need to contact HMRC regarding that.

spock007

Income > £70k but push this below the higher limit so effective 21% rate tax on income. 
Right, so I need to tell HMRC. It increases how much more I can earn without me paying extra 40% tax... 
That cash doesn't get added to the account, understood - thanks!

Dazed_and_C0nfused

One thing to remember is that HMRC only ever give tax relief on pension contributions for the tax year the contribution is made in.

If they amend your 2021:22 tax code that is not to give tax relief on a pension contribution made in 2020:21 but is an assumption that you will make a similar contribution in the 2021:22 tax year.

To keep things as accurate as possible you should provide HMRC with four bits of info,
Expected relief at source pension contributions in 2020:21 and 2021:22
Expected estimated earnings for 2020:21 and 2021:22 (P60 taxable pay amount for each year)

NottinghamKnight

Does the reference to CGT just mean higher rate tax?

spock007

"If they amend your 2021:22 tax code that is not to give tax relief on a pension contribution made in 2020:21 but is an assumption that you will make a similar contribution in the 2021:22 tax year."

I apologise but I don't understand...
I get the relief on my 2020-2021 income? 

OK so ONE snag in the works. I have ALL my pension payment details via payslips for all but 3 months in 2017-2018.... do you think this would be a problem? 

spock007

NottinghamKnight said:

Does the reference to CGT just mean higher rate tax?

I have investments that will generate > £20k returns next year sitting in a trading account right now. Bad enough normal rates of CGT but if UKGOV are bringing CGT in line with income tax rates then I am 100% going to be shielding in an ISA> Otherwise I might not have bothered - they've lost out on a little bit of tax here!

spock007

I also need to find out how much I was able to put into pension 2017-2018 and up to present year. I'm assuming it was always £40k

NottinghamKnight

spock007 said:

"If they amend your 2021:22 tax code that is not to give tax relief on a pension contribution made in 2020:21 but is an assumption that you will make a similar contribution in the 2021:22 tax year."

I apologise but I don't understand...
I get the relief on my 2020-2021 income? 

OK so ONE snag in the works. I have ALL my pension payment details via payslips for all but 3 months in 2017-2018.... do you think this would be a problem? 

No, the annual allowance can be used from previous tax years but the tax relief can only ever be claimed on tax in the year claimed, ie this is assuming you have £70k income this tax year.

spock007

Right and can I cherry pick years or does it have to start from furthest back (2017-2018)?
So if I claim for 2018-2019 say.... I will get tax relief back according to my income that year (also I note in Scotland the income tax bands have changed frequently the last few years, making this a little more complicated).

NottinghamKnight

spock007 said:

NottinghamKnight said:

Does the reference to CGT just mean higher rate tax?

I have investments that will generate > £20k returns next year sitting in a trading account right now. Bad enough normal rates of CGT but if UKGOV are bringing CGT in line with income tax rates then I am 100% going to be shielding in an ISA> Otherwise I might not have bothered - they've lost out on a little bit of tax here!

It's unclear what you are saying here, CGT rates have related to income for several years now. It's always wise to use tax shelters where possible though cash isas are and have been a little pointless for most for some time now. Investments generating returns aren't necessarily taxable and not for cgt. If this includes dividends then there is the dividend allowance which is 0% up to £2k, if the value of investments have increased then that doesn't trigger cgt, just if you sell.