Navigating higher rate tax

HCIMbtw

Just looking for a bit of advice as I think I am doing things kind of inefficiently. 

I'm a higher rate tax payer. Pretty standard PAYE tax on a single salary with a big employer that provides a cash equivalent car allowance and private health care. I pay almost all my salary above £50k into the company pension. However, I usually get a a bit of bonus of a couple of grand. 

Each year, after bonus is paid, I try work out how much I am going to earn by the end of the tax year in April and then I make a lump sum contribution to my SIPP. I then call the HMRC to claim the higher rate relief on my tax code. 

Last year I left all this until late in the year, and I overpaid tax by about £800-900. I'd rather not over pay on tax, my take home is really useful, so this year I've gone early, made a SIPP contribution for bonus for 022/23 already and spoken to the HMRC to adjust my tax code. 

But this all seems a bit of an inaccurate. I would just like all my salary above £50,271 to go to my pension. Am I able to make SIPP payments for a previous financial year? If so am I better off just having a taxable salary of about £53k, then making an exact contribution to my SIPP for the previous financial year once I have my P60, then claiming tax back as a lump sum? 

NB - salary sacrifice is not an option unfortunately with my employer. 

zagfles

You can't make SIPP payments for previous years.

But your tax code can be adjusted based on an estimated contribution, you don't have to already have contributed. In fact HMRC will usually do that themselves and assume you'll contribute the same this year as you did last year. If the estimate was wrong, it can be corrected after the end of the tax year and they'll either owe you or you'll owe them tax.

HCIMbtw

zagfles said:

You can't make SIPP payments for previous years.

But your tax code can be adjusted based on an estimated contribution, you don't have to already have contributed. In fact HMRC will usually do that themselves and assume you'll contribute the same this year as you did last year. If the estimate was wrong, it can be corrected after the end of the tax year and they'll either owe you or you'll owe them tax.

Ye they asked me last year on the phone whether I wanted to effectively carry over my expected SIPP contributions, and I said no, because they will vary, and they have. 

Man it seems like such an ugly system. 

zagfles

It's designed for basic rate taxpayers, so for them it's easy, just contribute and all sorted. But it makes it more complicated for higher rate taxpayers, or those who have other assessments against taxable income from which pension conts are deductible eg tax credits or their kid's student loan etc