Sipp contribution for low earner

Ciprico

If someone earned £2910 in the current year, is £2910 x .08 = £2328 the most they can put in a SIPP that year, or does the  £2880/£3600 unearned limit applied....?

tx

Dazed_and_C0nfused

Ciprico said:

If someone earned £2910 in the current year, is £2910 x .08 = £2328 the most they can put in a SIPP that year, or does the  £2880/£3600 unearned limit applied....?

tx

They could still add £2,880.  Which becomes £3,600 with the basic rate tax relief added.

zagfles

Ciprico said:

If someone earned £2910 in the current year, is £2910 x .08 = £2328 the most they can put in a SIPP that year, or does the  £2880/£3600 unearned limit applied....?

tx

The tax relief limit is the higher of earnings and £3600, so it would be £3600 minus any employee conts to workplace pension (sal sac/employer conts can be ignored).

That's gross of course, 80% of that amount as net. 

Ciprico

D&C,

Could you please clarify...

...are you saying essentially they could add £2880/3600 and the salary is irrelevant....

Thank you 

Dazed_and_C0nfused

Ciprico said:

D&C,

Could you please clarify...

...are you saying essentially they could add £2880/3600 and the salary is irrelevant....

Thank you 

It is for the limit yes, but as at @zagfles says any other contributions they have made in the same tax year have to be taken into account.

Employer contributions do not need to be deducted.

Grumpy_chap

Dazed_and_C0nfused said:

It is for the limit yes, but as at @zagfles says any other contributions they have made in the same tax year have to be taken into account.

Employer contributions do not need to be deducted.

My wife fell foul of this last year.  She stopped work and then made contributions of £2,880 (grossed up to £3,600) but forgot that she had received some earnings at the early part of the tax year for which employer and employee pension contributions had been made.

Our Accountant added all the parts as pension contributions (£3,600 plus employee plus employer) when he calculated the excess contributions.  It seems as though he may have been incorrect.  (The Accountant treated the £3.6k limit as effectively the AA applicable.)

Ciprico

On her last payslip...

EE pension TD was £54
ER pension TD was 3435 (This would be salsac)

Do either of these reduce the £2880/£3600 

no spurious pension contributions were made from net salary and she is now retired

Dazed_and_C0nfused

Ciprico said:

On her last payslip...

EE pension TD was £54
ER pension TD was 3435 (This would be salsac)

Do either of these reduce the £2880/£3600 

no spurious pension contributions were made from net salary and she is now retired

Just the EE one could.

But that depends on the method used.

If it's a relief at source contribution then yes it needs to be deducted (the gross amount including basic rate relief added by the pension company).

If it was a net pay contribution it should have already been factored in before arriving at the pay figure of £2,910.

Ciprico

.....no pension details were mentioned on P45.

I suppose I'll just reduce the 2880 by 54 * 1.25 to be on the safe side...

Dazed_and_C0nfused

Ciprico said:

.....no pension details were mentioned on P45.

I suppose I'll just reduce the 2880 by 54 * 1.25 to be on the safe side...

Pension contributions are never mentioned on a P45.  You would need to check payslips to understand what had happened.

Wouldn't it be 2880 less 54 or 3600 less 54 * 1.25 🤔