SIPP tax relief

Justso65

Hi

I contributed some money to my SIPP just prior to the end of the last tax year.  The contribution is included in last year’s tax year.  However, the auto 25% top up didn’t find its way into my SIPP until June in this tax year.  When I do a tax return what value of contribution do I declare for further tax relief?  I contributed £2000 and the SIPP provider claimed £500 on my behalf.  So I’m not sure what I can declare on my tax return.

Thank you for any responses, JS.

Dazed_and_C0nfused

It's a contribution of £2500 in 2022-23 

Justso65

Thank you.

Justso65

Hi, again.

As described above I paid £2000 into my SIPP and got £500 added for basic rate tax relief.  So when I do my self assessment I am expecting around another £500 to be claimed back from the tax man because I pay 40ish % tax.  Not sure the exact percentage.  I live in Scotland.  So my expectation is circa the same amount reclaimable as my SIPP provider already reclaimed.

However, in my self assessment in the “Pension payments to registered scheme. Enter payment and basic rate tax” section when I enter £2500 and view my calculation I get a tax refund of around £900 which is significantly higher than the £500ish I expected.  This section provides an example where you take the amount you contribute divide by 80 and multiply by 100 which matches my £2000 payment becoming an after basic rate relief value of £2500.  So I’m not sure why I seem to be getting more than expected tax refund.  

In addition the section immediately after this one refers to “one-off payments” but does not mention basic rate relief or give an example.  My payment is one off just prior to the tax year ending.

Does this make sense?

Thank you, JS.

Qyburn

Hi, my take on the "one off" question is that they will use that to decide whether to adjust your tax code for next year to allow for regular contributions. It doesnt change tax relief for the year you're submitting the return for (2022/23).

As Scottish tax payer higher rate is 41%, but the contribution will also save you some 21%.

The full calculation can be seen, so why not take your contribution out, look at the calculation and save it, the stick it back in to see what's changed.

Justso65

Thanks Qyburn.

That’s exactly what I did, I removed my £2500 pension contribution from the assessment and the difference is £970ish.  I can’t understand why that’s so much higher than the circa £500 I expect related to SIPP payments.  The £970 is in the ball park area of the total tax relief I expect on £2000 but I have declared as indicated in the instructions.  i.e Divide my actual contribution by 80 and multiply by 100 and declare that value.  In fact, if I use a pension relief calculator on the Hargreaves Lansdowne site it says contribute £2000, £500 will be claimed back by my SIPP provider as has happened and £550 further could be reclaimed via my self assessment.

Dazed_and_C0nfused

Justso65 said:

Thanks Qyburn.

That’s exactly what I did, I removed my £2500 pension contribution from the assessment and the difference is £970ish.  I can’t understand why that’s so much higher than the circa £500 I expect related to SIPP payments.  The £970 is in the ball park area of the total tax relief I expect on £2000 but I have declared as indicated in the instructions.  i.e Divide my actual contribution by 80 and multiply by 100 and declare that value.  In fact, if I use a pension relief calculator on the Hargreaves Lansdowne site it says contribute £2000, £500 will be claimed back by my SIPP provider as has happened and £550 further could be reclaimed via my self assessment.

That is a massive oversimplification as there is no set amount due with higher rate relief, it's a myth.

There is nowhere on a tax return to claim £550.

Your overall tax position is revised to take into the pension RAS contributions.  This might mean you are entitled to additional Personal Allowance (of tapering applies), or have a smaller HICBC or now be entitled to receive Marriage Allowance.

In very extreme circumstances HMRC can actually pay you to put money into a pension 😄

Really all you need to do is take a screen print of the calculation without the RAS contributions and then compare that to the calculation with the RAS contributions included and that will clearly show what has changed.

Qyburn

You should see something looking at the full calculation with vs without. 

When you add the contribution then underneath "How we have worked out your income tax" it will say something like "Your pension payments of £2,500.00 have increased your Scottish basic rate limit"

Then a list of amount taxed at each rate, and the resulting tax.

Compare those lines with and without the pension contribution.

If you'd put the figure in the wrong box, for example "Payments to a retirement annuity contract where basic rate tax relief will not be claimed by your provider" then it would appear differently, as additional line just above Personal Allowance.

Justso65

Dazed_and_C0nfused said:

Justso65 said:

Thanks Qyburn.

That’s exactly what I did, I removed my £2500 pension contribution from the assessment and the difference is £970ish.  I can’t understand why that’s so much higher than the circa £500 I expect related to SIPP payments.  The £970 is in the ball park area of the total tax relief I expect on £2000 but I have declared as indicated in the instructions.  i.e Divide my actual contribution by 80 and multiply by 100 and declare that value.  In fact, if I use a pension relief calculator on the Hargreaves Lansdowne site it says contribute £2000, £500 will be claimed back by my SIPP provider as has happened and £550 further could be reclaimed via my self assessment.

That is a massive oversimplification as there is no set amount due with higher rate relief, it's a myth.

There is nowhere on a tax return to claim £550.

Your overall tax position is revised to take into the pension RAS contributions.  This might mean you are entitled to additional Personal Allowance (of tapering applies), or have a smaller HICBC or now be entitled to receive Marriage Allowance.

In very extreme circumstances HMRC can actually pay you to put money into a pension 😄

Really all you need to do is take a screen print of the calculation without the RAS contributions and then compare that to the calculation with the RAS contributions included and that will clearly show what has changed.

Thank you but, respectfully, I feel you may have misunderstood what I meant.  I was not expecting to put a figure of £550 in a box and say I herby claim this amount,  The £550 was an assessment of what I thought I would be owed as extra tax relief and this was confirmed on the Hargreaves and Lansdowne calculator.  Their calculation seems to be that that the cost to me to have put £2500 (my £2k plus the £500 claimed by my SIPP provider) would be £1450.  At Scotland’s 42% tax £1450 is 58% of £2500.  Since I have put in £2k I am due back £550 tax bringing my cost down to £1450 out of my pocket to have £2.5k in my SIPP.

I did take a note of my rebate with and without the £2.5k pension contribution and the difference is circa £970.  I’m maybe over thinking this and I just enter the figures indicated and take what refund pops out at the end.  The instructions clearly state I declare £2500 in the box.

I’m more than happy to be given a higher than expected rebate but I like to understand how the number is arrived.

Thanks, JS.

Dazed_and_C0nfused

Justso65 said:

Dazed_and_C0nfused said:

Justso65 said:

Thanks Qyburn.

That’s exactly what I did, I removed my £2500 pension contribution from the assessment and the difference is £970ish.  I can’t understand why that’s so much higher than the circa £500 I expect related to SIPP payments.  The £970 is in the ball park area of the total tax relief I expect on £2000 but I have declared as indicated in the instructions.  i.e Divide my actual contribution by 80 and multiply by 100 and declare that value.  In fact, if I use a pension relief calculator on the Hargreaves Lansdowne site it says contribute £2000, £500 will be claimed back by my SIPP provider as has happened and £550 further could be reclaimed via my self assessment.

That is a massive oversimplification as there is no set amount due with higher rate relief, it's a myth.

There is nowhere on a tax return to claim £550.

Your overall tax position is revised to take into the pension RAS contributions.  This might mean you are entitled to additional Personal Allowance (of tapering applies), or have a smaller HICBC or now be entitled to receive Marriage Allowance.

In very extreme circumstances HMRC can actually pay you to put money into a pension 😄

Really all you need to do is take a screen print of the calculation without the RAS contributions and then compare that to the calculation with the RAS contributions included and that will clearly show what has changed.

Thank you but, respectfully, I feel you may have misunderstood what I meant.  I was not expecting to put a figure of £550 in a box and say I herby claim this amount,  The £550 was an assessment of what I thought I would be owed as extra tax relief and this was confirmed on the Hargreaves and Lansdowne calculator.  Their calculation seems to be that that the cost to me to have put £2500 (my £2k plus the £500 claimed by my SIPP provider) would be £1450.  At Scotland’s 42% tax £1450 is 58% of £2500.  Since I have put in £2k I am due back £550 tax bringing my cost down to £1450 out of my pocket to have £2.5k in my SIPP.

I did take a note of my rebate with and without the £2.5k pension contribution and the difference is circa £970.  I’m maybe over thinking this and I just enter the figures indicated and take what refund pops out at the end.  The instructions clearly state I declare £2500 in the box.

I’m more than happy to be given a higher than expected rebate but I like to understand how the number is arrived.

Thanks, JS.

There still is no such figure like that that would appear on a Self Assessment calculation.

Are you 100% certain you have entered the RAS contributions in the correct box on the return?

Have you worked through your calculation to see what the differences are?

What is the very bottom line of the calculation with and without the contributions?

Doctor_Who

Justso65 said:

Dazed_and_C0nfused said:

Justso65 said:

Thanks Qyburn.

That’s exactly what I did, I removed my £2500 pension contribution from the assessment and the difference is £970ish.  I can’t understand why that’s so much higher than the circa £500 I expect related to SIPP payments.  The £970 is in the ball park area of the total tax relief I expect on £2000 but I have declared as indicated in the instructions.  i.e Divide my actual contribution by 80 and multiply by 100 and declare that value.  In fact, if I use a pension relief calculator on the Hargreaves Lansdowne site it says contribute £2000, £500 will be claimed back by my SIPP provider as has happened and £550 further could be reclaimed via my self assessment.

That is a massive oversimplification as there is no set amount due with higher rate relief, it's a myth.

There is nowhere on a tax return to claim £550.

Your overall tax position is revised to take into the pension RAS contributions.  This might mean you are entitled to additional Personal Allowance (of tapering applies), or have a smaller HICBC or now be entitled to receive Marriage Allowance.

In very extreme circumstances HMRC can actually pay you to put money into a pension 😄

Really all you need to do is take a screen print of the calculation without the RAS contributions and then compare that to the calculation with the RAS contributions included and that will clearly show what has changed.

Thank you but, respectfully, I feel you may have misunderstood what I meant.  I was not expecting to put a figure of £550 in a box and say I herby claim this amount,  The £550 was an assessment of what I thought I would be owed as extra tax relief and this was confirmed on the Hargreaves and Lansdowne calculator.  Their calculation seems to be that that the cost to me to have put £2500 (my £2k plus the £500 claimed by my SIPP provider) would be £1450.  At Scotland’s 42% tax £1450 is 58% of £2500.  Since I have put in £2k I am due back £550 tax bringing my cost down to £1450 out of my pocket to have £2.5k in my SIPP.

I did take a note of my rebate with and without the £2.5k pension contribution and the difference is circa £970.  I’m maybe over thinking this and I just enter the figures indicated and take what refund pops out at the end.  The instructions clearly state I declare £2500 in the box.

I’m more than happy to be given a higher than expected rebate but I like to understand how the number is arrived.

Thanks, JS.

Minor point to bear in mind - the Scottish higher rate was 41% in 2022-23 and only changed to 42% this tax year. It will make a small difference to the calculation (not the £100s you are seeing).