How much to pay in for £60K max contribution this year

secondincometrader

Dazed_and_C0nfused said:

secondincometrader said:

Dazed_and_C0nfused said:

Sarahspangles said:

secondincometrader said:

I want to make the max contribution for this year of £60K into my SIPP. Does that mean I pay in £48K and my SIPP provider adds the £20% tax contribution of £12K (20% of £60K).

I can then claim back any addittional tax relief later.

Have I understood this correctly? Thanks in advance

The maximum contribution could be higher than £60k because you can carry forward unused Annual Allowance from previous years.

However there is also a separate limit of your relevant UK earnings for the current tax year.

The lower of those two will be your maximum contribution.

I think in this case carry forward may be limited by not being a member of a pension scheme in some or all of the previous 3 tax years.

Yes that's my understanding too

£60k in one year, which might only cost half of that after tax relief, is more than many people could dream of contributing so not a bad way to start!

To be honest it's not actually for me, it's for my 19 yr old son who started his own business during covid. If he's lucky he may never have to contribute to a pension again....

PropertyGuru_Wannabe

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

Grumpy_chap

secondincometrader said:

To be honest it's not actually for me, it's for my 19 yr old son who started his own business during covid. If he's lucky he may never have to contribute to a pension again....

Is his business Ltd Co?  If so, and the Ltd Co makes the contributions, the amount to pay is the full £60k from the business and there will be no tax relief added to the employer contributions (though, of course, no corporation tax, income tax or NI will have been paid on the contributions either).

Dazed_and_C0nfused

PropertyGuru_Wannabe said:

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

How do you know he isn't self employed 🤔

NoMore

PropertyGuru_Wannabe said:

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

If people don't know the rules around pension contributions how are they supposed to know they have given incorrect information.

secondincometrader

Dazed_and_C0nfused said:

PropertyGuru_Wannabe said:

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

How do you know he isn't self employed 🤔

Correct, he is self-employed

dunstonh

secondincometrader said:

Dazed_and_C0nfused said:

PropertyGuru_Wannabe said:

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

How do you know he isn't self employed 🤔

Correct, he is self-employed

Just for clarification, as some people use the self-employed tag incorrectly.  Is he a sole trader or using a limited company structure? - it makes a big difference when it comes to pensions.

secondincometrader

dunstonh said:

secondincometrader said:

Dazed_and_C0nfused said:

PropertyGuru_Wannabe said:

This completely changes things.  This means that your son's SIPP will not allow a third party to pay £48,000.  He also needs to be on the PAYE and pay himself.  If he is contributing as a director for the company which he owns, then it depends on how much profit the company makes.  Don't provide incorrect information initially please.

How do you know he isn't self employed 🤔

Correct, he is self-employed

Just for clarification, as some people use the self-employed tag incorrectly.  Is he a sole trader or using a limited company structure? - it makes a big difference when it comes to pensions.

Sole Trader

SVaz

So as a sole trader, he made £60k in pre tax net profit after all his expenses?  

If so then he’ll get basic tax relief plus higher rate tax relief on @ £10k .

Dazed_and_C0nfused

SVaz said:

So as a sole trader, he made £60k in pre tax net profit after all his expenses?  

If so then he’ll get basic tax relief plus higher rate tax relief on @ £10k .

I think he is expecting to have made a lot more profit than that and the intention is to make the maximum contribution of £60k.

In this instance the constraint will be not being a member of a pension scheme in previous years so £60k cannot be exceeded as no unused annual allowance exists.