SIPP contribution and tax relief question for non taxpayer

squarebeard

Just looking for a confirmation on what my wife can contribute to her SIPP this tax year 23/24

She earned a total of £7854 for a part time job which she left at the end of December 2023 and has no further plan to work for the rest of this tax year. She paid no income tax for this employment. She opted out of the workplace pension as she knew she would not be there long term and has made no other pension contributions thus far

In May 2023 she flexibly accessed her SIPP by crystallising some of it, taking a PCLS with the rest put into drawdown which she subsequently withdrew £3k from this drawdown pot - I know this has triggered the MPAA but I don't think this will be relevant in this case and she has no long term plans for full time work so this is not a concern for us

So her total 'income' for 23/24 in my mind should be £3000 + £7854 = £10,854 which is obviously still below the personal allowance limit so my question is, how much can she contribute back to her SIPP (which is a relief at source platform) to gain tax relief?

Is it £7854 - 20% (£6283) so that HMRC top up the tax relief to her employment earnings? Does the fact that she paid no income tax in 23/24 affect the amount she can contribute to her SIPP? Is the £3k she took as pension income (and the PCLS)  relevant as far as SIPP contributions are concerned?

Sorry, just realised that was more than one question 

QrizB

squarebeard said:

Is it £7854 - 20% (£6283) so that HMRC top up the tax relief to her employment earnings?

Yes.

squarebeard said:

Does the fact that she paid no income tax in 23/24 affect the amount she can contribute to her SIPP?

No.

squarebeard said:

Is the £3k she took as pension income (and the PCLS)  relevant as far as SIPP contributions are concerned?

No.

Dazed_and_C0nfused

There is no link between the tax she has paid (or not paid) and tax relief given under RAS.

From what you've posted she can contribute £6,283.20 net and that will become a gross contribution of £7,854 once the pension company adds the tax relief.

Although why she effectively took a voluntary pay cut whilst working and missed out on employer contributions but is now looking to contribute as much as possible is a mystery 😳.

squarebeard

Thanks for both responses, most helpful - to answer the last point, she was uncertain how long she was going to stick it out for, the employer contributions worked out less than £20 per month (it was a minimum wage job) so it was actually me who said not to worry about it as she had some ISA savings that we knew she could
she could transfer to her SIPP but I had a bit of a brain fog as to what we could exactly do

Thanks again!