SIPP Issue - Paid more than I should into it

Pathfinder000

I have a SIPP and I paid into it on the 1st April, not realising the new financial year started on a Monday and not the first of April.  What will be the fallout for having done so?  I think it's too late to take it out and put it back in.  I didn't work for last year and I realised I have overpaid by about £750 by putting it in early.

TadleyBaggie

The new tax year starts every 6th April, not on a specific day of the week.

Baldytyke88

Pathfinder000 said:

I have a SIPP and I paid into it on the 1st April, not realising the new financial year started on a Monday and not the first of April.  What will be the fallout for having done so?  I think it's too late to take it out and put it back in.  I didn't work for last year and I realised I have overpaid by about £750 by putting it in early.

If you have, I don't believe that they will notice.

Could it be that you are allowed to contribute previous years contributions?

aroominyork

If you complete a self-assessment you will show the over-payment and can add a note in the relevant free text box. If you do not complete one, you could sit in a phone queue to inform HMRC or write a letter to them, but if it was me I would just underpay by £750 in the new tax year.

A couple of years ago I realised I had overpaid into a SIPP by not reducing my net payments by £800 to account for having used the £1000 trading allowance. I never declared it and there were no repercussions - I just didn't do it again. If HMRC raise it wiht me in future I expect they will forgive me as it was a small and honest mistake; I likewise think you are fine, especially if you underpay by £750 this year.

masonic

Baldytyke88 said:

Pathfinder000 said:

I have a SIPP and I paid into it on the 1st April, not realising the new financial year started on a Monday and not the first of April.  What will be the fallout for having done so?  I think it's too late to take it out and put it back in.  I didn't work for last year and I realised I have overpaid by about £750 by putting it in early.

If you have, I don't believe that they will notice.

Could it be that you are allowed to contribute previous years contributions?

Not with tax relief if you don't have sufficient earnings in that tax year. Most providers don't permit contributions without claiming tax relief so the provider should be contacted and they would normally be able to refund the excess.

Albermarle

As above, contact the provider asap and they should refund the overpayment.

Pathfinder000

Ok, cool.  I'll need to sell some stuff as it's already invested.  It's kind of annoying given the markets took a massive dump a late, so selling at a loss, but if that's the requirement then that's how it goes.

After that I'll shoot them an email, although with mine it's not actually locked out (InvestEngine), so I could just withdraw it myself.

Pathfinder000

Sorry, one more question.  Do I calculate the amount based on the current value or the initial value?  The current value is about £400 less than the original invested amount.

dunstonh

Pathfinder000 said:

Sorry, one more question.  Do I calculate the amount based on the current value or the initial value?  The current value is about £400 less than the original invested amount.

The value of the contribution needs to be sold to cash.  Not the unit count you bought.  So, you will be facing a loss.  

EthicsGradient

If you notify the provider quickly, they may be able to stop the claim of the tax relief before HMRC does it (for the 2 SIPPs I've had. both seem to notify HMRC of payments from the 6th of one month to the 5th of the next. This gets credited to the SIPP near the end of the month after that, eg HMRC is notified of contributions from 6th March to 5th April, and the relief for that turns up around 25th May.

If the tax relief hasn't yet appeared in your account (maybe some providers do add it, anticipating the relief from HMRC), then you haven't yet bought anything with the relief. So perhaps you don't need to sell - see what the provider says. The advice above to contribute at least £750 less than you'd normally be allowed this year seems good.

Pathfinder000

dunstonh said:

Pathfinder000 said:

Sorry, one more question.  Do I calculate the amount based on the current value or the initial value?  The current value is about £400 less than the original invested amount.

The value of the contribution needs to be sold to cash.  Not the unit count you bought.  So, you will be facing a loss.  

I've already initiated the sell and yes, I assumed that would be the case.  My mistake, my consequences.  It's just how it is.   All a learning experience.

EthicsGradient said:

If you notify the provider quickly, they may be able to stop the claim of the tax relief before HMRC does it (for the 2 SIPPs I've had. both seem to notify HMRC of payments from the 6th of one month to the 5th of the next. This gets credited to the SIPP near the end of the month after that, eg HMRC is notified of contributions from 6th March to 5th April, and the relief for that turns up around 25th May.

If the tax relief hasn't yet appeared in your account (maybe some providers do add it, anticipating the relief from HMRC), then you haven't yet bought anything with the relief. So perhaps you don't need to sell - see what the provider says. The advice above to contribute at least £750 less than you'd normally be allowed this year seems good.

It hasn't gone through yet.  It says pending and also says it could take up to 11 weeks.  I'll email them shortly and when they reopen on Monday, hopefully get it cancelled and sorted by the weeks end.  

I know it takes 2 days to settle sell orders and a couple of days for a withdrawal.  Then put the money back in the week after and rebuy everything.