SIPP Contribution Tax Relief

I am looking to start paying into a SIPP and have a few questions on how the tax relief works. 

I will be making payments into the SIPP account from my net pay and I am in the higher earner tax band.  I have been using online tax relief calculators and for example if I was to contribute £10k:

The government will add 20%: so extra £2,500 - Total Contributions in SIPP is now £12,500

Does my SIPP provider arrange this and will automatically claim the extra funds from the government to top up?

There will be an additional higher rate tax relief of approx £3k - thus reducing the total cost to me to £7k.  From what I understand this higher rate pension tax relief is manually claimed by myself and can be done through the annual self assessment.  Is that correct?

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  • NoMoreNoMore Forumite
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    Yes to all your questions although if you don’t currently do self assessment you don’t have to do it for just pension tax relief. You can just contact HMRC and give them the relevant details to sort it out. 
  • edited 15 February at 8:10AM
    Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    edited 15 February at 8:10AM
    Does my SIPP provider arrange this and will automatically claim the extra funds from the government to top up?
    Yes

    And yes. The additional relief is based on your overall tax situation and if you already complete a return is done through that. With any tax savings benefitting you, it doesn't get added to the pension.
    If you are employed you can claim relief provisionally through your tax code but it's the tax return which finalises things.

    There will be an additional higher rate tax relief of approx £3k - thus reducing the total cost to me to £7k. From what I understand this higher rate pension tax relief is manually claimed by myself and can be done through the annual self assessment. Is that correct?


  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    NoMore said:
    Yes to all your questions although if you don’t currently do self assessment you don’t have to do it for just pension tax relief. You can just contact HMRC and give them the relevant details to sort it out. 
    I suspect the op is either liable to HICBC or has a tapered Personal Allowance so will be required to complete a return anyway.
  • pandaman888pandaman888 Forumite
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    Thanks to you both for clearing that up for me.  I wasn't mainly clear where the initial 20% relief comes from so good to know the SIPP provider takes care of that.

    I already do annual assessments as I have other income to declare so I will record the the pension contributions there in the future.
  • NoMoreNoMore Forumite
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    NoMore said:
    Yes to all your questions although if you don’t currently do self assessment you don’t have to do it for just pension tax relief. You can just contact HMRC and give them the relevant details to sort it out. 
    I suspect the op is either liable to HICBC or has a tapered Personal Allowance so will be required to complete a return anyway.
    Possibly that’s why I said if you don’t currently fill in a sa for other reasons. It’s more a comment for others as well. Lots of people assume you must fill in a sa when it’s not necessary if only reason is pension tax relief. 
  • jim8888jim8888 Forumite
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    Thanks to you both for clearing that up for me.  I wasn't mainly clear where the initial 20% relief comes from so good to know the SIPP provider takes care of that.

    I already do annual assessments as I have other income to declare so I will record the the pension contributions there in the future.
    Just wondered if you have any other pensions (eg company pension) and have you been claiming the additional relief you'd be entitled to on those? 
  • pandaman888pandaman888 Forumite
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    jim8888 said:
    Thanks to you both for clearing that up for me.  I wasn't mainly clear where the initial 20% relief comes from so good to know the SIPP provider takes care of that.

    I already do annual assessments as I have other income to declare so I will record the the pension contributions there in the future.
    Just wondered if you have any other pensions (eg company pension) and have you been claiming the additional relief you'd be entitled to on those? 

    Yes I have a company pension but my company pays into that directly as employers contributions and I don't make additional salary sacrifices into it.  My understanding is that  I dont claim additional tax relief on it?
  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    jim8888 said:
    Thanks to you both for clearing that up for me.  I wasn't mainly clear where the initial 20% relief comes from so good to know the SIPP provider takes care of that.

    I already do annual assessments as I have other income to declare so I will record the the pension contributions there in the future.
    Just wondered if you have any other pensions (eg company pension) and have you been claiming the additional relief you'd be entitled to on those? 

    Yes I have a company pension but my company pays into that directly as employers contributions and I don't make additional salary sacrifices into it.  My understanding is that  I dont claim additional tax relief on it?
    You cannot claim tax relief for an employer pension contribution.

    Even if you did make an additional salary sacrifice you still couldn't claim any tax relief as that would still be an employer contribution.

    You sacrifice £100 and £100 gets added to your pension with no tax relief top up.

    But you have avoided paying any income tax or National Insurance on the £100 sacrificed.
  • AlbermarleAlbermarle Forumite
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    Thanks to you both for clearing that up for me.  I wasn't mainly clear where the initial 20% relief comes from so good to know the SIPP provider takes care of that.

    I already do annual assessments as I have other income to declare so I will record the the pension contributions there in the future.
    After the first year ( when you normally get a tax rebate) HMRC assume you will make the same pension contribution the next tax year. They will take this into account in your tax code, so you will get more take home pay each month but no rebate should be needed .
  • sheslookinhotsheslookinhot Forumite
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    HMRC add 25% of your contribution

    25% of £10k = £2.5k


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