Can anyone help advise please on calculating 'pension input amount'?

zagfles

Dazed_and_C0nfused said:

zagfles said:

You don't need to know the pension input amount. That's needed for the annual allowance, which is £60k plus carry forwards, on a salary of £14.5k she's not going to get anywhere near it even if she maxes out the tax relief, unless very unusual circumstances. Tax relief limit is 100% of earnings. 

We get a similar thread every week here. 
Calculator giving zero DB Input - Can I put all my earnings into a SIPP? — MoneySavingExpert Forum
Annual Allowance - SIPP — MoneySavingExpert Forum

For most people with a straightforward job it's taxable earnings 

The op is getting mixed up between earnings/salary and taxable earnings.

Earnings/salary is not relevant in this situation.

The tax relief limit applies to all contributions you get tax relief on, including employee conts to a workplace pension. Earnings are relevant, it's based on earnings. See PTM044100 - Contributions: tax relief for members: conditions - HMRC internal manual - GOV.UK

Yes you can usually shortcut by saying taxable income = earnings minus employee conts, so the EXTRA that can be paid on top of net pay conts is taxable pay, but it doesn't always work, for instance some workplace pension conts use RAS so the gross RAS conts would need to be deducted, and for people earning under £3600 net pay conts would need to be taken off to work out how much extra can be paid. 

zagfles

max... said:

OK, my apologies guys - very happy to see it is simpler. 

From her most recent statement (10 months of 12) showing year to date: gross is 12464.92, taxable pay is 11779.38, tax paid 49.20, pensionable pay as per gross and employee conts to date 685.54.

I am also able to pass over to her my unused allowance under the married allowance.

So based on year to date she could contribute 11779 gross. If to a RAS scheme like a SIPP she would pay 80% as a net cont and the SIPP provider will claim the rest from HMRC.

If she's going to carry on earning you could work out what her full year taxable income will be, you don't have to wait till she's actually earned it if you're sure she will. (though even if you do accidently pay in too much you can get a refund, but it'll be a hassle). 

max...

Yes, two more earning months to add (so figures will increase) but as it stands now it's 11779 - 20% so 9423 and RAS via HMRC to add 2355?

max...

Can I tack on another question to save a new topic please?

Come April and the new tax year when my wife has finished work, like everyone not earning she can contribute £3600 (£2880 net + HMRC tax relief) gross to a SIPP in 2025/26 but if she earns say £2000 in a part time job can she also contribute this amount (so £1600 net) in addition to the £2880 'everyone' allowance (total £4480) or is the £1600 included in the £3600?

Basically she will be taking the max from her existing pension to be tax efficient so £16,760 to include 25% tax free. 

However, if she then earns £2000 on top this will of course be taxed but re-investing to get the tax relief would of course cancel this out.

NoMore

Its from earning of zero to £3600 you can use the £3600 limit, once you have relevant earnings above this then that becomes the limit.

So no you don't add £2000 to £3600, its still the £3600 as the £2000 earnings is less than £3600. If she gets to £4000 earnings then that becomes the limit for her, but if she's already done the £3600 then its only £400 more.

zagfles

max... said:

Can I tack on another question to save a new topic please?

Come April and the new tax year when my wife has finished work, like everyone not earning she can contribute £3600 (£2880 net + HMRC tax relief) gross to a SIPP in 2025/26 but if she earns say £2000 in a part time job can she also contribute this amount (so £1600 net) in addition to the £2880 'everyone' allowance (total £4480) or is the £1600 included in the £3600?

Basically she will be taking the max from her existing pension to be tax efficient so £16,760 to include 25% tax free. 

However, if she then earns £2000 on top this will of course be taxed but re-investing to get the tax relief would of course cancel this out.

No. The tax relief limit is £3600 or 100% of earnings whichever is greater, not £3600 plus earnings. See link above for the gory details. So if she earns £2000, then she can still only contribute £3600 gross, and this would include any employee workplace contributions.

This last point is important to bear in mind, so for instance if she paid in £2880 (£3600 gross) into a SIPP at the start of the tax year, and then later in the tax year got a part time job and earned £2000, if the part time job came with a pension then any employee pension conts would blow the tax relief limit, as she'd have got tax relief on eg £3700 with earnings of only £2000. This applies whether the pension conts are net pay or RAS, but would be OK if the pension conts were sal sac, as they'd be employer conts. It's one unusual case where tax relief works differently for net pay and sal sac. 

So if there's a prospect if getting a minimally paid job, it might be best not to put the whole £2880 into a SIPP until late in the tax year. You could put most of it in early, but possibly not the full amount till you know the score for the tax year. If earnings were higher, eg £5000, it probably wouldn't be an issue, so eg £500 employee conts plus the £3600 already put in wouldn't exceed earnings. 

max...

Thanks both - confirms eloquently what I guessed was the way it works...sadly!