Using pension carry forward as a non-earner

emmaj1045

A member of my family is in the unusual position of being a higher rate tax payer through a widow’s DB pension. Her estate is likely to pay inheritance tax so I wondered if it would be worth her paying the £3600 per year into a SIPP?
A few questions come from this:

As a higher rate tax payer does she pay in £2880 still or does it need to be reduced for 40% tax?

Can she claim the higher rate tax back on a self assessment?

Can she use pension carry forward to utilise the last couple of years when she was receiving the pension?  She was only widowed a couple of years ago and the pension was her husband’s so I assume she can’t go further back than that?  She does have a small DC pension pot from years ago. 

She is 72 so I assume that this can then be paid into until she is 75. Is it the tax year you turn 75 or can it be paid into up until her birthday?

Sorry for so many questions. I have tried googling but it is quite a specific situation. In the best case scenario would I be right in assuming that this would save her 40% In income tax now but also potentially 40% in inheritance tax as well (assuming her children didn’t have to pay income tax when they withdrew the money)?

Dazed_and_C0nfused

She pays £2,880.

Does she already need to complete a tax return?

Carry forward isn't something she can benefit from as she won't have used this years annual allowance.

You can never go backwards into an earlier year with pension contributions.

The cut off point is her 75th birthday so the final payment possible would be in the tax year she reaches 75.

No idea re IHT sorry.

xylophone

She can open a SIPP (DC pension) and pay in £2880 - the provider will claim tax relief of £720 and add it to the pot.

A relative is a full retired 75 year old and a higher rate tax payer - he made his final contribution of £2880 to his SIPP at the very beginning of this tax year, just a few days before his 75th birthday.

He is in Self Assessment and is given higher rate relief through the tax code.

With regard to inheriting a DC pension from a person who dies over age 75

https://www.hl.co.uk/retirement/preparing/tax-matters/what-happens-when-i-die

What happens to my pension if I die after age 75?

Pensions are usually free from inheritance tax, but any withdrawals your beneficiaries make will only normally be free from income tax if you die before age 75.

If you die when age 75 or older, payments will be taxed as income at your beneficiaries’ marginal rate (though they won’t pay National Insurance).

 It would appear that your relative is comfortably circumstanced with state pension, widow's pension and an existing DC pension.

If she is concerned about IHT on her estate, had she considered making regular gifts from income to her children/grandchildren?