What is classed as Income when looking at pensions tax relief ?

Pedromartinez

New to the forum and looking for advice.
I have been self employed for 3 years and in that time have not made any pensions contributions.  This year I am looking at paying a 1 off payment into a new Sipp and need advice on what is classed as “income” when looking at tax relief on any pension contribution. 

My current total income for 20-21 (£15K) is made up of what little i have earned this Covid year (4K)  plus a pension I receive from a previous employer.  (11k) 

I have spoken to the Pensions advisory service and they have advised that the pension I receive cannot be treated as “income” when it comes to claiming tax relief on any potential payment into a new Sipp and therefore I can only get tax relief on my 4k self-employed earnings.  Is this correct? 

If so, it seems doubly unfair given the HMRC definitely treated my pension as “income”when assessing that I  wasn’t entitled to a Self-Employed Covid grant because my Pension was 51% of my total income!

Thanks

Dazed_and_C0nfused

Pension income is not classed as pensionable earnings for the purpose of pension contributions.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/

Pedromartinez

So HMRC make you pay tax on your pensions income and also use it to stop you getting the Self-employed grant but don't treat it as income for contributions tax relief!  

Nice one

TVAS

Of course what the Pension Advisory Service told you was correct.

The pension income you receive from your employer 11k relates to PREVIOUS employment income. So what is important here is PENSION rather then INCOME of pension income. 

You rightly contacted the Pension Advisory Service then doubted what they told you was the truth.

Oh god everything is so unfair. You can make pension contributions based on earned income i.e. income earned in the current tax year. The 11k income relates to when you worked for an employer in the past. Your pension it does not rely on you having to work to get that 11k NOW. You did that work in the past.

You had income of 15k last year be grateful you are not on crappy universal credits with the threat of eviction. Why can't people count their blessings????? Covid assistance is there for those who had no income. You don't need it so there is no unfair about it. I wish people would be considerate of others, journeyman musicians who had all their gigs cancelled and now any gigs in Europe buggered because of Brexit, those who run a small business using a bricks and mortar premises who still have rent and utilities to pay, Pilots who paid for their own training with no job so could lose the house and can't pay their pilot training debt who are also loosing their flying skills because they are not flying. These people can rightly say its unfair you cannot. 
 

Pedromartinez

So its fair that you can get the self employed grant if you earn 50k and have a pension of 49k ?
I asked the question because HMRC told me the pension was counted towards the “income” figure whereas the PAS told me no.   

Oh and by the way, given i worked 40 years for that small pension i do not  think i deserve to be preached to by you! 

Mick70

If you ,or anybody, is working And receiving a pension .  Yes you can use the pension income (11k in your example) to pay into your new pension , however , your earnings are 4K and so what you can Pay into your new pension (including tax relief ) is limited to those annual earnings , 4K in this case .
im pretty certain I am right .
Hope things work out for you once the economy fully re-opens which won’t be long .
mick 

Pedromartinez

Thanks  Mick for your quick reply.
One follow on question, so if my earnings are 4k, can I put the full 4k into a sipp and it gets taxed up to 4.8k or do i have to put £3.2k and it gets rounded up to 4k by tax relief? Hope that makes sense

Dazed_and_C0nfused

You can contribute £4k gross, that's £3,200 from you and £800 tax relief added by the pension company.

Pedromartinez

Thanks for the answer D&C