Earnings cap for pension tax relief

lassfarfromhome

Hello, I've just retired and want to make pension contributions this year of the maximum I can get tax relief on.  I understand that this is 100% of my gross earnings (let's say that's 80k).  I am trying to work out how much more I can put into my SIPP that would attract tax relief.  I think this is 80k minus the gross contributions I have already made to my SIPP.  But do I also need to deduct the employee contributions I made to my workplace pension even though these were by salary sacrifice?  I have heard people say salary sacrifice is treated as employer contributions but not sure of what that means or in what context.  Any help gratefully received!

JoeCrystal

Read up on the Annual allowance for a start. Look at the government site, which should have all the information rather than relying on people.

https://www.gov.uk/tax-on-your-private-pension/annual-allowance

TheSpectator

First things first, unless you can utilise carry forward of unused annual allowance then your max annual allowance this year that you can get tax relief on is £60000. 

lassfarfromhome

JoeCrystal said:

Read up on the Annual allowance for a start.

https://www.gov.uk/tax-on-your-private-pension/annual-allowance

Thanks, I have done that.  I have 60k this year plus enough carry forward from the last three years to cover me

lassfarfromhome

TheSpectator said:

First things first, unless you can utilise carry forward of unused annual allowance then your max annual allowance this year that you can get tax relief on is £60000. 

Yes, I've got about 40k carry forward thanks.

TheSpectator

Ok, so salary sacrifice are regarded as employer contributions which do count towards the annual allowance

JoeCrystal

lassfarfromhome said:

TheSpectator said:

First things first, unless you can utilise carry forward of unused annual allowance then your max annual allowance this year that you can get tax relief on is £60000. 

Yes, I've got about 40k carry forward thanks.

I am not sure, but are you meant to have a high enough earned income this tax year to be able to use £40k on top? Aka £100k?

lassfarfromhome

TheSpectator said:

Ok, so salary sacrifice are regarded as employer contributions which do count towards the annual allowance

Thanks, yes, I know that.  What I am asking is, when I'm working out how much more to put into my SIPP (since I want to put in 100% of my gross earnings for this year), do salary sacrifice contributions (which on my payslip say they are employee contributions) count as personal contributions I have already made?  

So, let's say my gross earnings for the year are £80k.  Let's also say that by salary sacrifice I put £5k into my workplace pension.  I have not yet made any other contributions to that or my SIPP.  Will I now get tax relief on 75k or 80k?

400ixl

If your gross salary is £80k then you can only put that much in as a maximum regardless if you have more carry forward. So £60k this year + £20k carry forward.

Thats my understanding anyway.

NoMore

Are the gross earnings your quoting before or after the salary sacrifice ?

If before, you take the salary sacrifice off and that's the gross amount you can contribute into a pension and get tax relief.

If after then that's the gross amount you can contribute. 

Both assuming you have made no other relief at source contributions.

lassfarfromhome

NoMore said:

Are the gross earnings your quoting before or after the salary sacrifice ?

If before, you take the salary sacrifice off and that's the gross amount you can contribute into a pension and get tax relief.

If after then that's the gross amount you can contribute. 

Both assuming you have made no other relief at source contributions.

The gross earnings of 80k is after salary sacrifice has been taken off.  So, I understand the max I can get tax relief on is £80k.  But I'm trying to work out how much I should now put into my SIPP (I want to put in the max I can get tax relief on), and I don't know whether I can put in the whole £80k, or whether I need to deduct from that the pension contributions I have already made by salary sacrifice.