Pension tax relief with no relevant income

chucknorris

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

EDIT:
I didn't phrase the above very well hence this edit, what my real question is, is this:

I understand that if you have no relevant income you can contribute up to £3,600 gross into a pension and receive tax relief. So does that mean in order to receive full tax relief (as a 40% tax payer) that you can only invest £2,160 (being £3,600 x 0.6) in a tax year? Or can you contribute £3,600 and receive full pension tax relief as a 40% tax payer?

Dazed_and_C0nfused

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

chucknorris

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,600 x 0.6, rather than the £3,600 x 0.8 that I did invest).

EDIT:
My original question in the FIRST post on this thread very well, what my real question is, is this:

I understand that if you have no relevant income you can contribute up to £3,600 gross into a pension and receive tax relief. So does that mean in order to receive full tax relief (as a 40% tax payer) that you can only invest £2,160 (being £3,600 x 0.6) in a tax year? Or can you contribute £3,600 and receive full pension tax relief as a 40% tax payer?

Dazed_and_C0nfused

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

chucknorris

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

EDIT:
My original question in the FIRST post on this thread very well, what my real question is, is this:

I understand that if you have no relevant income you can contribute up to £3,600 gross into a pension and receive tax relief. So does that mean in order to receive full tax relief (as a 40% tax payer) that you can only invest £2,160 (being £3,600 x 0.6) in a tax year? Or can you contribute £3,600 and receive full pension tax relief as a 40% tax payer?

Dazed_and_C0nfused

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

chucknorris

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

Thanks, but my income is way above the threshold of the higher rate band, its just under £100k, and next year I will have to refurbish an investment rental property if I want to keep my full personal allowance and avoid the notional 60% tax band, and that is only if I postpone drawing down income from my SIPP (which I may do, but at some point soon I will have to start that process).

Linton

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

Thanks, but my income is way above the threshold of the higher rate band, its just under £100k, and next year I will have to refurbish an investment rental property if I want to keep my full personal allowance and avoid the notional 60% tax band, and that is only if I postpone drawing down income from my SIPP (which I may do, but at some point soon I will have to start that process).

When you pay asum  lump into a SIPP the provider only adds the equifvalent of basic rate tax relief.  Were there to be any higher rate relief due HMRC would pay that to you. rather than your pension.  So a net payment of £2880 applies no matter what your income is.

In your case with no earned income I believe the extra 20% higher rate relief would not be available.

FIREDreamer

Linton said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

Thanks, but my income is way above the threshold of the higher rate band, its just under £100k, and next year I will have to refurbish an investment rental property if I want to keep my full personal allowance and avoid the notional 60% tax band, and that is only if I postpone drawing down income from my SIPP (which I may do, but at some point soon I will have to start that process).

When you pay asum  lump into a SIPP the provider only adds the equifvalent of basic rate tax relief.  Were there to be any higher rate relief due HMRC would pay that to you. rather than your pension.  So a net payment of £2880 applies no matter what your income is.

In your case with no earned income I believe the extra 20% higher rate relief would not be available.

Not sure about tne last bit. If you are paying 40% tax on unearned income surely you are entitled to 40% pension tax relief on that portion of it (the extra 20% paid by HMRC to you, not the pension) when paying it into a pension (albeit capped at £3,600 gross).

Linton

FIREDreamer said:

Linton said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

Thanks, but my income is way above the threshold of the higher rate band, its just under £100k, and next year I will have to refurbish an investment rental property if I want to keep my full personal allowance and avoid the notional 60% tax band, and that is only if I postpone drawing down income from my SIPP (which I may do, but at some point soon I will have to start that process).

When you pay asum  lump into a SIPP the provider only adds the equifvalent of basic rate tax relief.  Were there to be any higher rate relief due HMRC would pay that to you. rather than your pension.  So a net payment of £2880 applies no matter what your income is.

In your case with no earned income I believe the extra 20% higher rate relief would not be available.

Not sure about tne last bit. If you are paying 40% tax on unearned income surely you are entitled to 40% pension tax relief on that portion of it (the extra 20% paid by HMRC to you, not the pension) when paying it into a pension (albeit capped at £3,600 gross).

No-one gets tax relief for pension payments beyond their earned income  (strictly speaking the extra 20% of gross paid by the provider is not tax relief).

Dazed_and_C0nfused

Linton said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

Dazed_and_C0nfused said:

chucknorris said:

I think that I might have invested too much in my SIPP this tax tear (but I'm not sure), since I retired (just before the end of the last tax year) I have no relevant income. I invested £2,880 into my Sipp shortly after the start of this tax year, but I am a 40% tax payer, so should have I only invested £2,160?

With a relief at source (RAS) contribution you only ever receive basic rate relief from the scheme provider, so you pay £2,880 to end up with a gross contribution of £3,600.

If you are entitled to some higher rate relief then you need to contact HMRC to claim this.

You do not get a fixed extra 20%, the gross contribution increases your basic rate band by £3,600 and your liability is calculated using the increased basic rate band. This might give you a personal tax saving of £720. But it could be more or less depending on your overall tax situation.

Thanks for your reply.

I have to fill in a tax return every year to account for my dividend, corporate bond and rental income anyway, so liaising with HMRC is no bother. So are you saying that I have NOT disadvantaged myself by investing a net £2,880 into my Sipp? It's my first year without salary and so no relevant income, so I wasn't sure if I should have only invested £2,160 (£3,000 x 0.6, rather than the £3,600 x 0.8 that I did invest).

If you have no earnings and are under 75 then you can still contribute £3,600 gross each tax year.

Which is £2,880 from you and £720 in basic rate tax relief.

Any personal tax saving will be resolved via your Self Assessment return.

https://www.ajbell.co.uk/pensions/sipp-allowances

Thanks, but will I be eligible to receive the further 20% tax relief (up from the 20% already received to 40%). My uncertainty is whether everyone gets full tax relief in this situation (i.e. with no relevant income) or whether it is limited to only the basic 20% tax relief? Maybe this situation isn't any different and there is no reason why 40% (and 45%) tax payers can't get the full relief?

The gross contribution will increase your basic rate band by £3,600.

If you aren't a Scottish resident this means the basic rate band of £37,700 becomes £41,300.

How this personally benefits you is entirely dependent on a few things, your total taxable income and source of that income being key. 

You may also become eligible for Marriage Allowance which in itself would likely add £252 to any other personal tax saving.

And you may also benefit from a £1,000 savings nil rate band, instead of £500.

Thanks, but my income is way above the threshold of the higher rate band, its just under £100k, and next year I will have to refurbish an investment rental property if I want to keep my full personal allowance and avoid the notional 60% tax band, and that is only if I postpone drawing down income from my SIPP (which I may do, but at some point soon I will have to start that process).

When you pay asum  lump into a SIPP the provider only adds the equifvalent of basic rate tax relief.  Were there to be any higher rate relief due HMRC would pay that to you. rather than your pension.  So a net payment of £2880 applies no matter what your income is.

In your case with no earned income I believe the extra 20% higher rate relief would not be available.

I'm sure the op will see the tax saving if they compare their Self Assessment calculation with and without the £3,600 RAS contribution.