Using previous years contribution tax relief

baz8755

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

Dazed_and_C0nfused

baz8755 said:

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

You are wanting to do something you can't.

If you are able to utilise carry forward of unused annual allowance (and a lot of people posting here think they can when in reality they can't) then that allows you to make additional payments in the current tax year.  But any tax relief due is relevant to the current tax year, not any previous tax year.

Basically you are too late now to benefit from tax relief in any earlier tax year (as far as pension contributions are concerned).

MX5huggy

You’re confusing Annual Allowance which you can carry forward with tax relief which you can’t. 

To use the AA from previous years you need the income in this year to cover it. If you’ve not earned more than £60k this year then the AA is not relevant. 

It’s a bit more complicated if you have an active DB pension with its Pension Input Amount calculation.

Triumph13

The way carry forward works is that your contributions are limited to the lower of a)this year's earnings, or b) your annual allowance plus unused allowance carried forward from the previous three years.

If you had £40k of carry forward, plus your annual allowance of £60k and your earnings this year were £70k then the most you could contribute would be £70k.

baz8755

Dazed_and_C0nfused said:

baz8755 said:

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

You are wanting to do something you can't.

If you are able to utilise carry forward of unused annual allowance (and a lot of people posting here think they can when in reality they can't) then that allows you to make additional payments in the current tax year.  But any tax relief due is relevant to the current tax year, not any previous tax year.

Basically you are too late now to benefit from tax relief in any earlier tax year (as far as pension contributions are concerned).

OK so moving money from ISA to 'backfill' previous years SIPP will not give me a 20% 'bump' but will constrain me with pension taxes and rules. Best to leave previous years alone and concentrate on maxing out current year.

Dazed_and_C0nfused

baz8755 said:

Dazed_and_C0nfused said:

baz8755 said:

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

You are wanting to do something you can't.

If you are able to utilise carry forward of unused annual allowance (and a lot of people posting here think they can when in reality they can't) then that allows you to make additional payments in the current tax year.  But any tax relief due is relevant to the current tax year, not any previous tax year.

Basically you are too late now to benefit from tax relief in any earlier tax year (as far as pension contributions are concerned).

OK so moving money from ISA to 'backfill' previous years SIPP will not give me a 20% 'bump' but will constrain me with pension taxes and rules. Best to leave previous years alone and concentrate on maxing out current year.

Not sure where "best to leave" comes into it.

Until you have utilised this year's annual allowance (£60k) you cannot carry forward any unused annual allowance from previous years.

Are you actually able to utilise the full £60k of this year's allowance 🤔

baz8755

Dazed_and_C0nfused said:

baz8755 said:

Dazed_and_C0nfused said:

baz8755 said:

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

You are wanting to do something you can't.

If you are able to utilise carry forward of unused annual allowance (and a lot of people posting here think they can when in reality they can't) then that allows you to make additional payments in the current tax year.  But any tax relief due is relevant to the current tax year, not any previous tax year.

Basically you are too late now to benefit from tax relief in any earlier tax year (as far as pension contributions are concerned).

OK so moving money from ISA to 'backfill' previous years SIPP will not give me a 20% 'bump' but will constrain me with pension taxes and rules. Best to leave previous years alone and concentrate on maxing out current year.

Not sure where "best to leave" comes into it.

Until you have utilised this year's annual allowance (£60k) you cannot carry forward any unused annual allowance from previous years.

Are you actually able to utilise the full £60k of this year's allowance 🤔

I simplified the situation to give the essence of what I am trying to achieve but here is a more detailed explaination of the situation.

I no longer work but am living of savings, I contribute the approx £3.6K pa into my SIPP and have a sizeable amount in ISA. I am currently not drawing pension.

The question was to do with my wifes SIPP, she earns £35K pa and total gross contributions over the past few years have been £5K pa. and her pot in not very big.

My thinking was to take around £30K out of my ISA to max out her pension contributions and get her max tax relief, I have just realised this will not be needing any of the unused pension allowance from previous years. I hadn't fully done my sums and I guess we won't be able to put more in than she earns so wouldn't be able to 'top-up' previous years anyway.

So I guess I can still put £30k into her pension to give her a tax benifit but nothing more.

Dazed_and_C0nfused

baz8755 said:

Dazed_and_C0nfused said:

baz8755 said:

Dazed_and_C0nfused said:

baz8755 said:

I have done the sums and it would appear that I have not fully utilised my tax relief in previous years. I therefore want to use my savings to top up my SIPP.

So my question is do I need to inform the HMRC or do I just pay the money into my SIPP and HMRC will connect the dots?

You are wanting to do something you can't.

If you are able to utilise carry forward of unused annual allowance (and a lot of people posting here think they can when in reality they can't) then that allows you to make additional payments in the current tax year.  But any tax relief due is relevant to the current tax year, not any previous tax year.

Basically you are too late now to benefit from tax relief in any earlier tax year (as far as pension contributions are concerned).

OK so moving money from ISA to 'backfill' previous years SIPP will not give me a 20% 'bump' but will constrain me with pension taxes and rules. Best to leave previous years alone and concentrate on maxing out current year.

Not sure where "best to leave" comes into it.

Until you have utilised this year's annual allowance (£60k) you cannot carry forward any unused annual allowance from previous years.

Are you actually able to utilise the full £60k of this year's allowance 🤔

I simplified the situation to give the essence of what I am trying to achieve but here is a more detailed explaination of the situation.

I no longer work but am living of savings, I contribute the approx £3.6K pa into my SIPP and have a sizeable amount in ISA. I am currently not drawing pension.

The question was to do with my wifes SIPP, she earns £35K pa and total gross contributions over the past few years have been £5K pa. and her pot in not very big.

My thinking was to take around £30K out of my ISA to max out her pension contributions and get her max tax relief, I have just realised this will not be needing any of the unused pension allowance from previous years. I hadn't fully done my sums and I guess we won't be able to put more in than she earns so wouldn't be able to 'top-up' previous years anyway.

So I guess I can still put £30k into her pension to give her a tax benifit but nothing more.

From what you've posted it's unlikely you will need to take £30k out of your ISA as she would only need a maximum of £28k in cash.

If she added £28k to a SIPP then the pension company adds 25% to make a gross contribution of £35k.

The above assumes that her taxable earnings i.e. the amount on her P60 will be £35k and she hasn't made any other relief at source contributions.

If her normal contributions made in respect of her employment are relief at source then that will limit the amount she can add to a SIPP (or personal pension).

And all the above is with 🤞 that you haven't omitted to mention her existing employment pension is a DB one.

baz8755

Dazed_and_C0nfused said:

And all the above is with 🤞 that you haven't omitted to mention her existing employment pension is a DB one.

No She has a small workplace pension and a SIPP but in the figures I mentioned I roled up the workplace and SIPP into one to get the £5K figure.

TheSpectator

So what will be the value of the workplace pension contributions this year - they need to be taken into account.

baz8755

TheSpectator said:

So what will be the value of the workplace pension contributions this year - they need to be taken into account.

Already rolled up into the £5K p.a. figure in the illustration, it's almost a 50/50 split between SIPP and workplace (all figures are ballparkish as I don't want to give away exact values)