Claiming SIPP tax relief BEFORE potential budget change…?

Juno_Moneta

Ok so I am a higher rate 40% taxpayer. 

I have made personal SIPP contributions in current tax year 2024-25.

i have received the first 20% of gross tax relief back into my SIPP as normal. 

As per prior years I would normally wait until my next Self Assessment eg around May / June 2025 to declare the contributions and get the second 20% of gross tax relief deducted from my tax calculation. 

This year is different. 

Labour are tipped to make changes to pension tax relief in the budget in October. 

So let’s assume they reduce it.

Tax changes are typically ‘with effect from the next tax year’ - so that would be 2025-26. So no impact on current year contributions - fine. 

But … what if due to the need to ‘make difficult decisions’ they announce an immediate change eg from 1st November. 

So the point of my post: Is there an incentive to mitigate this possibility by making a manual claim now via letter or phone to HMRC (which is allowed) rather than waiting until submitting SA next year - with the simple objective of receiving a cheque payment BEFORE the budget?!

Anyone else been thinking about doing this?

Dazed_and_C0nfused

Juno_Moneta said:

Ok so I am a higher rate 40% taxpayer. 

I have made personal SIPP contributions in current tax year 2024-25.

i have received the first 20% of gross tax relief back into my SIPP as normal. 

As per prior years I would normally wait until my next Self Assessment eg around May / June 2025 to declare the contributions and get the second 20% of gross tax relief deducted from my tax calculation. 

This year is different. 

Labour are tipped to make changes to pension tax relief in the budget in October. 

So let’s assume they reduce it.

Tax changes are typically ‘with effect from the next tax year’ - so that would be 2025-26. So no impact on current year contributions - fine. 

But … what if due to the need to ‘make difficult decisions’ they announce an immediate change eg from 1st November. 

So the point of my post: Is there an incentive to mitigate this possibility by making a manual claim now via letter or phone to HMRC (which is allowed) rather than waiting until submitting SA next year - with the simple objective of receiving a cheque payment BEFORE the budget?!

Anyone else been thinking about doing this?

You are asking about something that won't happen.

Firstly HMRC are highly unlikely to deal with your letter before the budget.  

Secondly they don't make tax refunds in the way that you want.

You either get provisional tax relief via a tax code adjustment or the actual extra tax relief (which isn't necessarily a fixed 20% anyway) via your Self Assessment return.

A cheque from HMRC isn't going to happen.  

You have already made the contribution, that should be what matters.

Hattie627

Why take the risk? You can claim before doing your SA return at the end of the tax year, so no harm in getting your claim in now, before the Budget. No harm done if no change. It's not like you would be taking action which might disadvantage you on the basis of  speculation.

I've paid into a personal pension/SIPP for years, on the understanding that 25% could be taken out tax-free after age 55 (or 57 from 2028) and I've been told that there is no guarantee that a new tax treatment won't apply to future withdrawals from already-created pension pots. 

No wonder the public have very little trust in pensions and many don't bother. Goalposts constantly changing and rules that are so complex you have to be a pensions professional to understand them 

JoeCrystal

Hattie627 said:

No wonder the public have very little trust in pensions and many don't bother. Goalposts constantly changing and rules that are so complex you have to be a pensions professional to understand them 

I can understand your point. If the public was in the wild days when companies could raid pension funds for their misdeeds or overpromise benefits to cause an insurance firm to collapse or bankrupt a company, all pensioners and deferred members lost everything. But we have come a long way since then. Arguably, pension freedoms have introduced a more comprehensive range of choices and options than they used to be.

However, the public must spend time and effort understanding how their pension schemes work, even more so if they only invest in their auto-enrolment schemes. Choosing a fund (mainly if the employer chose an inadequate default fund) takes time and understanding. I am afraid that some people do not understand their pension schemes, even more so with the DC pension schemes.

Suppose people are baffled by the public sector pension schemes, and there are still posts once in a blue moon with the OP believing it is a pot of money rather than an index-linked pension scheme. In that case, I shudder to think of even vastly more complicated pension schemes with DC pension schemes overall. I think it is just a lack of understanding or, worse, a lack of willingness to learn.

By the way, which rules do you think are so complicated? I generally find relevant information on HMRC, government sites, or legislation. And do not forget, this pension forum is a total gold mine!

Albermarle

Labour are tipped to make changes to pension tax relief in the budget in October. 

There are more 'tips' about what Labour are going to do in the budget, than there are tips for the race meeting at Sandown today. Probably just as likely to be right or wrong as well !

Anyway if they do change pension tax relief, it is a major administrative task, with lots of potentially unexpected complications, so very unlikely it will be implemented by April 6th 2025. 

Marcon

Please could we have a separate board for these endless and pretty pointless questions, which are doing nothing but clog up this board to no good effect.

dunstonh

Labour are tipped to make changes to pension tax relief in the budget in October. 

Source?  (not media speculation as that has historically been so wrong that often none of what they predict appears in the budget)

Labour is implementing a review of pensions, the outcome of which will lead to changes. They have also said there will be a consultation on that review.

The pensions policy institute estimated that a 20% flat rate would cost £5.8bn and a 33% flat rate would cost £9.6bn.  Whereas the current method costs £9.3bn.   Moving to a single rate won't likely be a money saver but a change who benefits the most.  So, that is another reason why delaying it for the pension review makes more sense.  This budget is about increasing the tax take. No shuffling it around.  Especially in areas that will be addressed in the pension review.       It was also noted that removing higher rate relief would lead to double taxation on higher rate taxpayers that would result in pensions being less used and therefore reduce the tax take during the retirement years.

Labour has told the pension providers that they do not intend a repeat of the Conservative's abolition of the LTA and introduction of the LSA, etc and sufficient time will be given for changes and consultation.

westv

Marcon said:

Please could we have a separate board for these endless and pretty pointless questions, which are doing nothing but clog up this board to no good effect.

All we need is a Budget 2024 thread. I mentioned about this last week I think but I guess it won't happen yet.

Inbetweeners

westv said:

Marcon said:

Please could we have a separate board for these endless and pretty pointless questions, which are doing nothing but clog up this board to no good effect.

All we need is a Budget 2024 thread. I mentioned about this last week I think but I guess it won't happen yet.

Or 'Pure Speculation'

Sarahspangles

Inbetweeners said:

westv said:

Marcon said:

Please could we have a separate board for these endless and pretty pointless questions, which are doing nothing but clog up this board to no good effect.

All we need is a Budget 2024 thread. I mentioned about this last week I think but I guess it won't happen yet.

Or 'Pure Speculation'

It might be handy for future budgets to have a link to each piece of press speculation, and then edit it with ‘Didn’t happen’.

JoeCrystal

Inbetweeners said:

westv said:

Marcon said:

Please could we have a separate board for these endless and pretty pointless questions, which are doing nothing but clog up this board to no good effect.

All we need is a Budget 2024 thread. I mentioned about this last week I think but I guess it won't happen yet.

Or 'Pure Speculation'

Can be called "Upcoming Pension Changes and Speculations!" instead.