Naive question about SIPP contribution annual limits

solidpro

Hi Everyone

If a ltd company puts in the maximum company contribution of £60k a year into my SIPP. Is there a limit on what a director can additionally contribute personally? 


Thanks

Dazed_and_C0nfused

solidpro said:

Hi Everyone

As a director of a limited company, the company puts in the maximum company contribution of £60k a year into my SIPP. Is there a limit on what I can additionally contribute personally? I have some money sitting in premium bonds, I'd like to put into my SIPP also.

As a follow up, if it's ok to do this, what additional percentage would the government add on?

Thanks

It is always 25% that is added to personal contributions which qualify for tax relief.  Which is 20% of the gross contribution.

How much do you expect to earn i.e. the pay that will be shown on your P60?

Do you just have one employment in this tax year?

solidpro

£12500 salary. Thanks

Marcon

solidpro said:

Hi Everyone

As a director of a limited company, the company puts in the maximum company contribution of £60k a year into my SIPP. Is there a limit on what I can additionally contribute personally? I have some money sitting in premium bonds, I'd like to put into my SIPP also.

As a follow up, if it's ok to do this, what additional percentage would the government add on?

Thanks

There's no limit to what you can contribute - but there is a limit on contributions which are tax-relievable.

If your company is already contributing £60K on your behalf, you would only get tax relief on any further contributions if you can use something called 'carry forward'. See https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/carry-forward/

solidpro said:

Thanks, I make just under £50k as a combination of salary and dividends. One employer.

Not sure why you'd want to make personal contributions (as opposed to company), unless your company's profits aren't sufficient to pay more? The fact you are receiving dividends (which don't count as 'earnings' for pension purposes) suggests there is cash available.

solidpro

Ok, this is mixing into three questions then.

1) Is the total combined company and personal limits joined? i.e, could the company contribute £60k and additionally me personally contribute a personal contribution (matching my income?)?

2) Is the personal tax-relievable aspect affected or limited by my existing company contribution?

3) Is the carry-over for personal contribution linked to the company contribution? If last year was also the max £60k, does that mean I have no carry over for personal contribution for this year?

Thanks

Marcon

solidpro said:

Ok, this is mixing into three questions then.

1) Is the total combined company and personal limits joined? i.e, could the company contribute £60k and additionally me personally contribute a personal contribution matching my income?

2) Is the personal tax-relievable aspect affected or limited by my existing company contribution?

3) Is the carry-over for personal contribution linked to the company contribution? If last year was also the max £60k, does that mean I have no carry over for personal contribution for this year?

Thanks

1. You wouldn't get tax relief on any contributions which exceed the annual allowance, whether personal or company. If you pay in too much, there'll be a tax charge for exceeding the annual allowance.
2. Yes.
3. If you've used your full annual allowance for previous years by means of a company contribution, you can't make further tax-relievable contributions by using carry forward.

Please read the link I've given in my previous post - it's very helpful and covers all the above.

Marcon

Dazed_and_C0nfused said:

solidpro said:

Hi Everyone

As a director of a limited company, the company puts in the maximum company contribution of £60k a year into my SIPP. Is there a limit on what I can additionally contribute personally? I have some money sitting in premium bonds, I'd like to put into my SIPP also.

As a follow up, if it's ok to do this, what additional percentage would the government add on?

Thanks

It is always 25% that is added to personal contributions which qualify for tax relief.  

Make sure you've read the whole of this sentence - the last four words are important!

solidpro

So I think the key here is if, this year, the company has already paid £60k to a director's SIPP, the director cannot use the £12500 of this year's salary element of my income to personally pay in another £12500 and get 25% bump from tax relief.

However, if last year the company only paid £50k in company contributions, the director could use the carry over from the annual £60k limit to pay in an extra £10k personally and recieve a 25% bump.

Finally, does the carry-over apply to company contributions as well as personal ones. So if the company only paid £50k last year, this year the director could either pay that extra £10k personally and get a 25% bump or they could pay in £70k total from company contributions and save on the company's CT?

Am I right? Thanks

NoMore

not quite the basic tax relief counts against the AA as well. So if you have 10k AA available, you can put 8k in a pension and get 2k tax relief to use it up.

solidpro

NoMore said:

not quite the basic tax relief counts against the AA as well. So if you have 10k AA available, you can put 8k in a pension and get 2k tax relief to use it up.

Ah, OK. 

So the £60k limit as a company director emcompasses both company and personal contributions.

The annual £60k limit can be carried over, so if it was only £50k company contribution last year, it can be £70k this year.

If I chose to pay some of that limit personally (sticking equal or under the salary element of my P60 income), I should factor in the 25% bump-up when calculating my limit. So sticking to the £10k carry-over from last year + £60k this year, the total I can pay in this year is £70k entirely from the company or £60k company, £8k personal with £2k tax-relief....

Triumph13

And carry forward can be used for the previous three years, not just one.  Used in order current year, then year -3, then -2, then -1