Self Assessment Tax Return - Pension Allowable Expense

BathMoney

Hello,

Just completed my 2021-2022 self-assessment tax return.

During that time I have added to a SIPP pension via AJ Bell Youinvest.

I was assuming that contributions to my pension would have been an allowable expense or not taxed as income in my self-assessment tax return.  Yet I could see nothing about this in the self-assessment form, have I missed something?

  

  

Albermarle

If you added your contributions directly, then AJ Bell will have added basic rate tax relief to them. You should be able to see this if you check online with AJ Bell. So in simple terms you pay the same tax but get some of it back this way into your pension.

You still need to enter your gross contributions on your SA ( means your contribution + the tax relief) . Likely it will not actually make any difference but it can have an effect in some circumstances, such as if you are a higher rate taxpayer.

Dazed_and_C0nfused

BathMoney said:

Hello,

Just completed my 2021-2022 self-assessment tax return.

During that time I have added to a SIPP pension via AJ Bell Youinvest.

I was assuming that contributions to my pension would have been an allowable expense or not taxed as income in my self-assessment tax return.  Yet I could see nothing about this in the self-assessment form, have I missed something?

  

  

You cannot claim pension contributions as an expense.

You do include them in the pension contributions section of your return though and they will increase the amount of your basic rate tax band.

For most people there is no personal tax saving from contributing to a SIPP.  The benefit is seen by the 25% which gets added to your pension fund.

So you pay £1,000 and have a pension fund of £1,250 but pay exactly the same amount of tax as you would if you hadn't contributed anything to your pension 

zagfles

BathMoney said:

Hello,

Just completed my 2021-2022 self-assessment tax return.

During that time I have added to a SIPP pension via AJ Bell Youinvest.

I was assuming that contributions to my pension would have been an allowable expense or not taxed as income in my self-assessment tax return.  Yet I could see nothing about this in the self-assessment form, have I missed something?

  

  

Look at page 4, "Tax reliefs", "Paying into registered pension schemes".

SIPP contributions are similar to an allowable expense, but as you already get basic rate tax relief by the provider reclaiming the basic rate tax, you only get higher rate(s) of relief through your tax return - this works by them extending your basic rate tax band by the gross contributions.

So they don't technically reduce your gross income, however they do reduce "adjusted net income" which is used for stuff like the child benefit "high income" threshold of £50k and the personal allowance taper at £100k. In the end it works out almost the same as having pension conts as an allowable expense.