SIPP tax relief

stellios84

Can anyone tell me how much I can put into a SIPP in regards to the tax relief situation? I keep rereading articles but am not 100% sure. I earn around 21k a year and have always paid into my nhs pension and have just opened a SIPP. I have inheritance to put in but am very unsure about limits? I have read about backdating a 3yr allowance if you already have a pension but am struggling to find clear answers. Thank you in advance .

Dazed_and_C0nfused

You cannot backdate pension contributions.

The section "Q: My client is an active member of his employer’s defined benefit pension scheme. He also wants to make a personal pension contribution" in this article is worth a read.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-contributions-qa/

zagfles

You can only get tax relief on pension contributions up to 100% of your earnings this tax year, so eg if you earn £21k and pay £2k into the nhs pension you can put £19k gross into a SIPP, that would be £15,200 net that you'd pay in, the SIPP would claim the remaining £3800 from HMRC. There is no carry forwards, it's done on current tax year's earnings only.

There's also the annual allowance but that's £40k and allows 3 year carry forwards, so on £21k salary even with a generous pension scheme like the nhs it's very unlikely to be an issue if you stick to the tax relief limit.

lr1277

Out of curiosity, if you contribute more thant £2880 to a SIPP, do you have to complete a self-assessment return for the taxman declaring your pension contribution?

Dazed_and_C0nfused

Not normally no.

stellios84

zagfles said:

You can only get tax relief on pension contributions up to 100% of your earnings this tax year, so eg if you earn £21k and pay £2k into the nhs pension you can put £19k gross into a SIPP, that would be £15,200 net that you'd pay in, the SIPP would claim the remaining £3800 from HMRC. There is no carry forwards, it's done on current tax year's earnings only.

There's also the annual allowance but that's £40k and allows 3 year carry forwards, so on £21k salary even with a generous pension scheme like the nhs it's very unlikely to be an issue if you stick to the tax relief limit.

I have just put 30k into a SIPP via Interactive Investor but not yet invested yet because I was so unsure. So is that too much? 

Linton

stellios84 said:

zagfles said:

You can only get tax relief on pension contributions up to 100% of your earnings this tax year, so eg if you earn £21k and pay £2k into the nhs pension you can put £19k gross into a SIPP, that would be £15,200 net that you'd pay in, the SIPP would claim the remaining £3800 from HMRC. There is no carry forwards, it's done on current tax year's earnings only.

There's also the annual allowance but that's £40k and allows 3 year carry forwards, so on £21k salary even with a generous pension scheme like the nhs it's very unlikely to be an issue if you stick to the tax relief limit.

I have just put 30k into a SIPP via Interactive Investor but not yet invested yet because I was so unsure. So is that too much? 

Whether you have bought any fuinds is irrelevent.  It is the money transferred into a SIPP which counts.

£30K pension contribution when you have only £21K earned income in a tax year is breaking the rules I am afraid so you should not get the tax relief on the excess.  It would be worth asking II whether the excess contribution can be undone - from a quick googIe I believe this is allowed.

Steve182

Linton said:

stellios84 said:

zagfles said:

You can only get tax relief on pension contributions up to 100% of your earnings this tax year, so eg if you earn £21k and pay £2k into the nhs pension you can put £19k gross into a SIPP, that would be £15,200 net that you'd pay in, the SIPP would claim the remaining £3800 from HMRC. There is no carry forwards, it's done on current tax year's earnings only.

There's also the annual allowance but that's £40k and allows 3 year carry forwards, so on £21k salary even with a generous pension scheme like the nhs it's very unlikely to be an issue if you stick to the tax relief limit.

I have just put 30k into a SIPP via Interactive Investor but not yet invested yet because I was so unsure. So is that too much? 

Whether you have bought any fuinds is irrelevent.  It is the money transferred into a SIPP which counts.

£30K pension contribution when you have only £21K earned income in a tax year is breaking the rules I am afraid so you should not get the tax relief on the excess.  It would be worth asking II whether the excess contribution can be undone - from a quick googIe I believe this is allowed.

I would contact II right away to try to undo most or all of the contribution before they claim (or try to claim) the 25% HMRC topup on your behalf. If they are anything like AJ Bell they will process claims the month after the contribution is received, and today is 1st May.

Once you have clarified the exact maximum amount you are allowed to contribute this year you can always put more back in.

zagfles

You can claim the excess back, at least HMRC allow you to, but I'm pretty sure you have to wait till after the end of the tax year because until then you can't know exactly what the excess is, or even if there is one. After all you could get a new job paying more or do loads of overtime etc, in which case you wouldn't be allowed the excess back.

Normally you can't get a refund of pension contributions, this is one of the small number of situations where you can so until you know what the excess is, I don't see how you could claim it back. 

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