Non Taxpayer, Tax relief, £2880 and recycling question.

Sanxxx

My OH works part time for the NHS and will earn c£11k gross in 24-25 with employee pension contributions of c£600, she has an untapped c£60k DC pension . 

The initial plan was to withdraw c£3k from the pension , in order to take a taxable amount up to the personal allowance of £12,570. Then to recycle £2280 (£2880-£600) back into the DC pension and get the tax relief.

Having given it more thought, is it feasible to withdraw more from the pension, say c£13k in order to recycle up to the relevant earnings limit i.e. c£11k ?

I don’t think that this falls foul of the recycling rules but am unsure, despite having read a couple of articles, as to whether tax relief for a non taxpayer can be given over and above the £2880.

drumtochty

The maximum annual contribution net of £2,880 is for some one with no earned income. Pension income from their SIPP is not earned income.

Your other half has £11,000 gross less £600 gross pension contributions. Therefore they have a pensionable income of £10,400, that could be used to pay into a SIPP if the liked to do that.

In this case they could take an an annual basis sum of £12,570 the personal allowance less their £10,400 take home pay from their SIPP. It is sensible to withdraw £2,170 from their SIPP as their would be no tax to pay no income tax on this withdrawal.

Therefore if your other decides that, they would have annual earned income of £10,400 and annual pension income of £2,170. A total annual income of £12,570.

Therfore say they want to pay £4,000 into their SIPP, they have an earned income pot of £10,400 to fund that from. There is no issue with recycling of pension income.

You are confusing the case of a person with no earned income against someone who has earned income. 

That would only be an issue if they were wanting to pay in say over £10,400 x 80 %. A sum in excess of £8,320 per annum. Which is £10,400 after tax relief is added to their net payment.