SIPP annual deposit allowance

vivvov

Hello All

In work in the NHS. mid level band 6...approx. £38k/year
I presently pay into the statutory pension scheme but I've recently received a fairly substantial inheritance approximately a year ago.
I've used this years ISA allowance for the year and the rest I put into a couple savings accounts.
I've been thinking I really should set up a SIPP but haven't got round to it.
I read that I can put an amount up to the amount of my Gross annual salary. 
I also read that this could be backdated a couple of years?

I was hoping to get some basic advice in regards the details.

Primarily, whether I'll need to adjust the Gross amount per year I can put into the SIPP by subtracting the annual NHS pension contributions and the £12,750 single person tax allowance from the total Gross salary to obtain the correct Gross amount that will receives the full tax rebate into the SIPP?

I started my present position in late 2022. So would I be able to back date the amount I can put into the SIPP to include tax years: late 2022/April 2023, 2023/2024 and 2024/2025?

Also, do I need to claim the tax rebates for the period(s) or would IWeb do that automatically?
(I hold my ISA with IWeb..so will use them for the SIPP).

I just want to maximise the amount of income tax rebate.

Plus any other info would be gratefully received, what with being a SIPP newbie...is there anything blindingly obvious I could do with knowing?

Thanks in advance
Neill

Dazed_and_C0nfused

vivvov said:

Hello All

In work in the NHS. mid level band 6...approx. £38k/year
I presently pay into the statutory pension scheme but I've recently received a fairly substantial inheritance approximately a year ago.
I've used this years ISA allowance for the year and the rest I put into a couple savings accounts.
I've been thinking I really should set up a SIPP but haven't got round to it.
I read that I can put an amount up to the amount of my Gross annual salary. 
I also read that this could be backdated a couple of years?

I was hoping to get some basic advice in regards the details.

Primarily, whether I'll need to adjust the Gross amount per year I can put into the SIPP by subtracting the annual NHS pension contributions and the £12,750 single person tax allowance from the total Gross salary to obtain the correct Gross amount that will receives the full tax rebate into the SIPP?

I started my present position in late 2022. So would I be able to back date the amount I can put into the SIPP to include tax years: late 2022/April 2023, 2023/2024 and 2024/2025?

Also, do I need to claim the tax rebates for the period(s) or would IWeb do that automatically?
(I hold my ISA with IWeb..so will use them for the SIPP).

I just want to maximise the amount of income tax rebate.

Plus any other info would be gratefully received, what with being a SIPP newbie...is there anything blindingly obvious I could do with knowing?

Thanks in advance
Neill

It's not your gross salary, it's your taxable pay (P60 pay figure) that will apply to most people.

As you are in the NHS pension scheme your taxable pay is quite a bit less than your salary.

The Personal Allowance, which is only £12,570, is irrelevant.

You have to use all of this year's annual allowance before you use any prior years. As your pensionable earnings are less than £40k why do you think you can use carry forward? Have you worked out what the PIA will be for your DB (NHS) pension?

You are not involved with the pension tax relief. You just need to make sure what you pay (the net amount) qualifies for tax relief. The SIPP provider will claim 25% of that from HMRC and add it to your pension. So you handover say £5,000 and you end up with £6,250 in your pension.

Unless you are Scottish resident or have loads of other taxable income not yet disclosed there is no tax refund you can claim.

Linton

There are 2 separate limits to personal pension contribuytions. One is the earnings limit which means that you cannot contribute more into all your pensions than your gross earnings in a tax year and still claim full tax rebate.  

The second is the Annual Allowance of £60K in a tax year which limits all contributions to your pension from any source.  There is limited carry over. With DB pensions like your NHS one the total contribution, both your and your employer's, is replaced by the Pension Input Amount which is included in your annual statement.  The slight problem is that you dont know what it is until after the end of the tax year so some prudent guesswork may be needed.

Both limits must be satisfied.  You can only pay into a pension for the current tax year.

The 20% basic rate tax relief is paid into your pension by the SIPP. The 20% higher rate relief is paid to you personally by HMRC.  You shouldnt need to tell HMRC about it but you will probably get the rebate paid much more quickly if you do. 

SacredStephan

Remember you can usually access your SIPP from age 55, this is set to change to 57 on 6 April 2028.

spaniel101

Mid level Band 6 appears to be £39,405 (20% tax payer)?


Tax Relief Limit (relevant earnings)

Example:

£39,405 would be your 'Pensionable Pay' headline salary (as indicated at the top of your payslip) before nhs pension contributions.

You subtract from this, all your pension contributions paid to date this year (given pension contributions are non-taxable).   This leaves your gross 'Taxable' pay.    If you have a steady state of same pay each month, take a look at your 'Taxable Pay to Date' then add February's and March's Gross 'Taxable' Pay if you know what it is.


If your pension contributions are set at 9.8%, this is approx £3861.69 nhs pension contributions in 2024/25. 


£39,405 - £3,861.69 = gross 'Taxable' pay of £35,543.31.   This is your Gross Tax Relief Limit which you could contribute to a SIPP.


£28,434.65 Net SIPP contribution from you, £7108.66 Tax Relief from HMRC. 




Annual Allowance (60K)

Calculating NHS Pension Input Amount (PIA) for Annual Allowance:

https://www.nhsbsa.nhs.uk/sites/default/files/2022-08/Process for calculating the Annual Allowance-20220824-(V5) .pdf

spreadsheeterapple

vivvov said:

Hello All
............
I read that I can put an amount up to the amount of my Gross annual salary. 
I also read that this could be backdated a couple of years?
...........

I started my present position in late 2022. So would I be able to back date the amount I can put into the SIPP to include tax years: late 2022/April 2023, 2023/2024 and 2024/2025?
...........

1.
re. "can put an amount up to the amount of my Gross annual salary"
- you can't put this amount into your new SIPP, because what you have read about refers to the total amount which can be paid in across all pensions which you are paying into. So you'd need a figure from your existing pension scheme first, before you can calculate how much more you can contribute to another pension.
- if you pay in too much, there will be a tax charge for anything over the limit.

2.
re. what you have read about being able to put more into your new SIPP by backdating the last few years
- no you can't do any backdating at all, because the SIPP wasn't open during those years, it didn't exist
- 'backdating' is only in respect of payments you could have put in to a pension you already had on the go during the preceding years but didn't do so.
EDIT: I have struck-through my wording as it may not be correct; see others' comments further down this thread. (This illustrates that not even professional advisers get everything right, and I may not be going back to the one who stated this!)

3.
Have you considered AVC into your existing NHS pension scheme, because the charges might be lower than a standalone SIPP, and/or you might get more paid out to you in pension. I don't know the NHS pension scheme, so you'd have to check into it.

4.
You can ask for free factual advice on the government moneyhelper.org.uk which also has loads of factsheets on pension topics.

Marcon

OP - this thread might make useful reading and gives a very comprehensive explanation of when carry forward can (and more to the point can't!) be used: https://forums.moneysavingexpert.com/discussion/6586881/how-to-implement-pension-carry-forward#latest

spreadsheeterapple said:

2.
re. what you have read about being able to put more into your new SIPP by backdating the last few years
- no you can't do any backdating at all, because the SIPP wasn't open during those years, it didn't exist
- 'backdating' is only in respect of payments you could have put in to a pension you already had on the go during the preceding years but didn't do so.

To use carry forward, you must have been a member of a registered pension scheme during the tax year(s) for which you wish to use carry forward.  It doesn't have to be the same scheme to which OP wants to contribute now (ie a newly set up SIPP) - unless you have a link to legislation confirming the scheme had to be 'in existence' as you've suggested above?

If you really want to do your head in, look at HMRC's manual(!): https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm055100

AlanP_2

spreadsheeterapple said:

vivvov said:

Hello All
............
I read that I can put an amount up to the amount of my Gross annual salary. 
I also read that this could be backdated a couple of years?
...........

I started my present position in late 2022. So would I be able to back date the amount I can put into the SIPP to include tax years: late 2022/April 2023, 2023/2024 and 2024/2025?
...........

2.
re. what you have read about being able to put more into your new SIPP by backdating the last few years
- no you can't do any backdating at all, because the SIPP wasn't open during those years, it didn't exist
- 'backdating' is only in respect of payments you could have put in to a pension you already had on the go during the preceding years but didn't do so.

You only need to have had a pension "in place" during the year you want to carry forward from not the exact pension you might contribute to.

In this case the OP was a member of the NHS pension scheme so could utilise carry forward for payments into a newly opened SIPP (if the relevant salary and AA conditions were met).

vivvov

Thank you for all the advice. From a standing start of knowing next to nothing, the info and advice has been highly useful.
Glad to hear (if I'm reading it correctly?!) that due to paying towards a pension via my NHS pension scheme I can open a SIPP then contribute and receive tax rebate for previous years.

vivvov

spaniel101 said:

Mid level Band 6 appears to be £39,405 (20% tax payer)?


Tax Relief Limit (relevant earnings)

Example:

£39,405 would be your 'Pensionable Pay' headline salary (as indicated at the top of your payslip) before nhs pension contributions.

You subtract from this, all your pension contributions paid to date this year (given pension contributions are non-taxable).   This leaves your gross 'Taxable' pay.    If you have a steady state of same pay each month, take a look at your 'Taxable Pay to Date' then add February's and March's Gross 'Taxable' Pay if you know what it is.


If your pension contributions are set at 9.8%, this is approx £3861.69 nhs pension contributions in 2024/25. 


£39,405 - £3,861.69 = gross 'Taxable' pay of £35,543.31.   This is your Gross Tax Relief Limit which you could contribute to a SIPP.


£28,434.65 Net SIPP contribution from you, £7108.66 Tax Relief from HMRC. 




Annual Allowance (60K)

Calculating NHS Pension Input Amount (PIA) for Annual Allowance:

https://www.nhsbsa.nhs.uk/sites/default/files/2022-08/Process for calculating the Annual Allowance-20220824-(V5) .pdf

Thanks Spaniel101 for this detailed and clear breakdown.
Very much appreciated.

Kind Regards