What to do with 50K from property sale 12 to 18 months away from Drawdown

grumpsthegit

My partner is in a similar position aside from her earnings are much lower - however I believe that she can claim tax relief for up to 3 previous years if you have not used all of the allowances available in these previous years -  do you need to complete a form or inform the Inland Revenue if you want to do this or will it just happen when the request comes from the pension provider to the IR?

MallyGirl

you only get tax relief in the year of contribution. You are thinking about carry forward but that is only relevant if you want to contribute above the AA (£60k) and have sufficient earnings to support such a contribution

Albermarle

grumpsthegit said:

My partner is in a similar position aside from her earnings are much lower - however I believe that she can claim tax relief for up to 3 previous years if you have not used all of the allowances available in these previous years -  do you need to complete a form or inform the Inland Revenue if you want to do this or will it just happen when the request comes from the pension provider to the IR?

A very widespread misunderstanding that comes up regularly on here.
You can only get tax relief based on earnings in the tax year that we are in.

Albermarle

ColdIron said:

segovia said:

MX5huggy said:

segovia said:

xylophone said:

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

I am still working and relative earnings can justify a large contribution, it's a good question. If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?  

These types of posts/questions are much easier if you give at least an approximation of your salary because the limits are and impacts are very much different for someone with little earnings compared with someone on £150k.

Do you have to option of paying into an employers pension via Salary Sacrifice? This would be the most tax efficient way of using up the £50k. It is also where the National Minimum Wage comes into play as a limit because you can’t sacrifice beyond reducing your income to NMW. 

I am a 40% taxpayer which indicates my salary thresholds.  

With 40% tax, a SIPP contribution is by far a better route than ISA for the generous relief to you

OP - As above 40% tax relief is very generous so should be made best use of.

However you can not get more 40% tax relief than 40% tax you have paid. So if you paid this £50K into a pension next tax year, then considering you will only be working for 9 months of the tax year, you would have to have a pretty high salary to get 40% tax relief on all of it .
Would probably be better to add some/most of it this tax year, and some next tax year?
So action needed in the next few days ?

segovia

Albermarle said:

grumpsthegit said:

My partner is in a similar position aside from her earnings are much lower - however I believe that she can claim tax relief for up to 3 previous years if you have not used all of the allowances available in these previous years -  do you need to complete a form or inform the Inland Revenue if you want to do this or will it just happen when the request comes from the pension provider to the IR?

A very widespread misunderstanding that comes up regularly on here.
You can only get tax relief based on earnings in the tax year that we are in.

Unfortunately my windfall will be next tax year and due to winding down I will not reach the 40% tax threshold

xylophone

Do you have any savings you can use now?

segovia

xylophone said:

Do you have any savings you can use now?

I am already maxed out on my 60K limit for 2023/2024 with nothing I can carry forward