Calculating SIPP contributions to come in under higher rate 22-23

HCIMbtw

I changed jobs recently and now know what my 22-23 total income and pension contributions will be. Working back from this I am trying to work out the right level of SIPP contributions to make, to make sure I come in under the higher rate tax threshold for the financial year. 

I need my effective gross income to be £49k.

My gross earnings (prior to any pension contribution) will be 74,578. I will have paid 17,354 into company pensions (some salary sacrifice, some AVCs). This takes 57,224 gross income. 

However, I have already paid 1,280 into my SIPP this year. The HMRC have topped this up to make it £1,600 in the SIPP. 

So I think this takes my effective gross salary down to 55,624. The difference between this and 49k, is 6,624. So I believe I need to pay a further 5,300 into my SIPP, which the HMRC will top up 6,625 and makes me square.  

Any advice on if I am calculating this right or have missed anything would be appreciated. 

Dazed_and_C0nfused

My gross earnings (prior to any pension contribution) will be 74,578. I have already paid 17,354 into company pensions (some salary sacrifice, some AVCs). This takes 57,224 gross income. 

Not necessarily so.  Salary sacrifice actually means you haven't paid into the pension, they are employer contributions. Which is why no pension tax relief is added.

What method was used to add money to your AVC?  Net pay, relief at source or salary sacrifice?

The bit below is completely wrong.  RAS contribution to a SIPP do not reduce your taxable income.  They increase your basic rate band (by the gross contribution).  This does help avoid higher rate tax but it's always easier to get the correct outcome if you understand how different types of pension contributions work tax wise.

However, I have already paid 1,280 into my SIPP this year. The HMRC have topped this up to make it £1,600 in the SIPP. 

So I think this takes my effective gross salary down to 55,624. 

HCIMbtw

Apologies.. I've been clumsy with my words. I'm not sure any of my pension contributions are salary sacrifice. I have a chunk of them come out in the left hand box of my PAYE, which means I get tax and NI relief on them. Then a bit of them comes out the middle box of my PAYE slip, which gives me income tax relief on them (but not NI I think). 

The SIPP contributions are the only ones which are RAS  

P.s. take your point about SIPP contributions increasing my basic rate tax band. This is why I am trying to make sure I get my SIPP contributions right, so I can contact HMRC, get my tax band corrected and and come in under the higher rate for the year. 

HCIMbtw

just bumping this up if anyone has any other advice? 

Dazed_and_C0nfused

Are you able to clarify the correct details yet?

What do you expect your P60 to show your taxable pay for the year as?

Do you have any other taxable income (interest, dividends, company benefits etc)?

Is the £1,600 the only RAS contribution made so far in the current tax year?

This is very confusing as you, unusually, seem to be using three different methods to contribute to your pension. 

Apologies.. I've been clumsy with my words. I'm not sure any of my pension contributions are salary sacrifice. I have a chunk of them come out in the left hand box of my PAYE, which means I get tax and NI relief on them.
Only salary sacrifice saves NI

Then a bit of them comes out the middle box of my PAYE slip, which gives me income tax relief on them (but not NI I think). 
That would be net pay

The SIPP contributions are the only ones which are RAS  

HCIMbtw

Dazed_and_C0nfused said:

Are you able to clarify the correct details yet?

What do you expect your P60 to show your taxable pay for the year as?

Do you have any other taxable income (interest, dividends, company benefits etc)?

Is the £1,600 the only RAS contribution made so far in the current tax year?

This is very confusing as you, unusually, seem to be using three different methods to contribute to your pension. 

Apologies.. I've been clumsy with my words. I'm not sure any of my pension contributions are salary sacrifice. I have a chunk of them come out in the left hand box of my PAYE, which means I get tax and NI relief on them.
Only salary sacrifice saves NI

Then a bit of them comes out the middle box of my PAYE slip, which gives me income tax relief on them (but not NI I think). 
That would be net pay

The SIPP contributions are the only ones which are RAS  

Except the sipp, i just pay into a standard workplace pension with aviva. 

I pay above the standard contribution rate into my employee scheme. Because of the way my company pension is set up, my AVCs don't get the NI benefit, which is why I reflect the different formats of payment. But basically I don't pay income tax on my any of my company pension contributions. I don't know the correct term to use for that type of contribution, or how to reflect what it will mean for my p60 at the end of the year. 

- My gross income for the year will be 74,578 (prior to any pension contributions). 
- My contributions to the work place pension by the end of the tax year, from my salary, will be 17,354
- I paid 1,280 into my SIPP this tax year, that is the only contribution i've made (it received 320 tax relief in the SIPP making it 1,600). 

This is the entirety of my taxable affairs, no other sources of income. 

Dazed_and_C0nfused

It's the method of contributing that is important.

You do genuinely need to understand that to make sure you get the correct answer further down the line.

What do you expect your P60 to show your taxable pay as for 2022:23?

If you contribute using net pay or salary sacrifice then there should be a significant difference between your salary (which is usually irrelevant for tax purposes) and your taxable pay.

HCIMbtw

So I logged into the government tax account today, and it expects my taxable pay for the 22-23 year about 57k

So gross salary, with company pension contributions removed.. lines up with my figures

Actually spoke to the HMRC aswell, don't think there is a way I can pay into my SIPP to reduce this figure... All I could do is contribute to the SIPP to increase my tax free allowance.. but to increase my tax free allowance 7k would require one hell of a SIPP contribution.... (Like 35k)

So I think what I am going to do, is change my work place pension contributions for the next two months to 90% of my pay..

This will take my taxable pay to about 49k year for the year, not the 57k the government have forecasted

NB. Still don't know what the correct way to refer to my pension is though... I'm pretty sure it counts as salary sacrifice. It's just the way the trust is set up for the company pension additional contributions are processed differently.

HCIMbtw

P.s. The annoying thing here is it means I have basically moved money into my SIPP earlier in the year for almost F all reason...

Damn monies tied up until 57 now

molerat

Paying into your SIPP does not increase your tax free allowance.  Paying into a SIPP may change your tax code if you are an other than basic rate tax payer but that is only in an attempt to collect the correct amount of tax for the year.  Salary sacrifice is a specific method where only the employer makes contributions so you have "sacrificed salary" meaning you have earned less with the resulting reduction in tax and NI.  Net pay deducts your pension contributions from your gross pay before tax but you still pay NI on that contribution amount.  Relief at source takes deductions from your taxed net pay with the pension providing crediting  basic rate tax on top of hat amount.