Double dipping Tax Relief

Steam_Engineer

Greetings,

I have searched this forum and others to find an answer to my SIPP tax relief conundrum but cannot find an answer.  I shall try and chunk down my question.  

1.  I have contributed £24,000 nett (approx) to my SIPP in FY23/24.
2.  The SIPP provider has credited ~£6,000 in basic rate tax relief.
3.  I can apply to HMRC for the ~£6,000 higher-rate tax relief which I would like as a rebate in preference to a tax-code change.  I can then get the money into the market/SIPP, working quicker.
4.  I paid 40% tax on ~£37,000 in FY23/24.
5.  Conundrum Point Alert:   If I then add this £6k tax rebate to my SIPP it will again enjoy 20% tax relief - and I could presumably claim higher-rate Tax Relief on this amount next year.  i.e. I will get £1500 (at 20%) and £1500 (at higher rate).
6.  This could seemingly go on in a roundabout fashion until I had exhausted all of my 40% relief - or HMRC spotted this merry go round.

Now, a couple of things don't sit right for me with the scenario:  
1. This looks like double dipping tax relief - HMRC would never allow this.
2. Does the fact i have put the 40% relief rebate into my SIPP this Financial Year preclude me from claiming it next year and thus thus is how HMRC prevent this practice.

I do not want a tax bill in a few years due to an error on my part.   My accountant advises put the rebate into an ISA.   I could, but then if my scenario is permissible then it would increase my SIPP contributions.

Thanks
SteamEngineer

Albermarle

 Does the fact i have put the 40% relief rebate into my SIPP this Financial Year preclude me from claiming it next year

You can only claim tax relief on contributions made in the financial year.
So contributions in 23/24, can only be eligible for tax relief in 23/24.

NoMore

Assuming your talking within the same tax year (see Albemarle point above), its not double dipping and its not a loop hole.

Putting 24k in and then 6k in from the tax rebate, is the same as putting 30k in in the first place, the tax position at the end will be exactly the same. 

Marcon

Steam_Engineer said:

Greetings,

I have searched this forum and others to find an answer to my SIPP tax relief conundrum but cannot find an answer.  I shall try and chunk down my question.  

1.  I have contributed £24,000 nett (approx) to my SIPP in FY23/24.
2.  The SIPP provider has credited ~£6,000 in basic rate tax relief.
3.  I can apply to HMRC for the ~£6,000 higher-rate tax relief which I would like as a rebate in preference to a tax-code change.  I can then get the money into the market/SIPP, working quicker.
4.  I paid 40% tax on ~£37,000 in FY23/24.
5.  Conundrum Point Alert:   If I then add this £6k tax rebate to my SIPP it will again enjoy 20% tax relief - and I could presumably claim higher-rate Tax Relief on this amount next year.  i.e. I will get £1500 (at 20%) and £1500 (at higher rate).
6.  This could seemingly go on in a roundabout fashion until I had exhausted all of my 40% relief - or HMRC spotted this merry go round.

Now, a couple of things don't sit right for me with the scenario:  
1. This looks like double dipping tax relief - HMRC would never allow this.
2. Does the fact i have put the 40% relief rebate into my SIPP this Financial Year preclude me from claiming it next year and thus thus is how HMRC prevent this practice.

I do not want a tax bill in a few years due to an error on my part.   My accountant advises put the rebate into an ISA.   I could, but then if my scenario is permissible then it would increase my SIPP contributions.

Thanks
SteamEngineer

You're making your own life needlessly complicated! 

The higher rate tax rebate is a red herring. Your earnings would appear to support the maximum contribution.

You say you've paid higher rate tax on around £37K in this tax year, so you have scope to make tax-relievable contributions in 2023/24 of the maximum annual allowance of £60K (personal contributions + basic rate tax relief on these, plus any employer contributions). 

You may have scope for carry forward: https://www.moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/carry-forward but you'd only get higher rate relief on personal contributions of around £37K, given that you will only have paid basic rate tax on any further contributions in the tax year.

Steam_Engineer

Marcon said:

You're making your own life needlessly complicated! 

Ah, the perennial habit of over-thinking the problem is possibly not unique to engineers, but must be a heightened tendency.

Many thanks to all for the replies.  I was missing the point that I have the scope to make tax relievable contributions.

Thank you.