Paying into a SIPP for tax relief

MTB1986

Hi, I’ve read some posts about non-taxpayers paying £2880 into a SIPP and having the tax relief of £720 added, I’d like to help my mother do this but I wanted to ask if doing this and withdrawing the whole amount would make her liable to tax. 

She’s 67, retired and her only incomes are a full state pension of £175.20 a week and a very small DB pension of £76 per month from her old employer. If she opened a SIPP, put the £2880 in and withdrew the £3600 once the tax relief had been added, would she be liable for any tax? If so, how would she go about paying it? 

Dazed_and_C0nfused

Based on what you have posted she would be liable to tax as she'd have taxable pension income of,

£9,110 State Pension

£912 DB pension

£2,700 SIPP income

Total = £12,722

Tax due on £12,722 = £30.40

The above assumes she hasn't applied for Marriage Allowance and isn't Scottish resident for tax purposes.

If she withdrew it all in one go then more than £30 tax would be deducted so HMRC would just retain this when they refunded the excess.

MTB1986

Thank you, it seems a no brainer then, especially if she wouldn’t have to do a self assessment tax return or anything like that, I want to keep it as simple as possible for her. She’s on a very limited income so this extra money would help her out quite a bit. And am I right in thinking she can do this each tax year until she turns 75? 

Dazed_and_C0nfused

Yes, think she must do the last one before she hits 75.

Any tax overpaid is automatically refunded but she can claim it back if she doesn't want to wait for HMRC to refund it.

https://www.gov.uk/tax-overpayments-and-underpayments

MTB1986

Thanks again, I appreciate it.