SIPP contribution limit

aroominyork

OH receives state pension, NHS pension, and £6000 from consultancy work. She claims £1000 trading allowance on her self-assessment. Is the most she can pay into her SIPP (which is not yet in drawdown) £4000 net, ie £5000 gross?

Isthisforreal99

Yes, her taxable earned income is the gross limit, so as you say £4000 net.

QrizB

She could choose to not claim the trading allowance, and then you could pay £4800 in. This might leave you better off overall; check for yourself.

aroominyork

QrizB said:

She could choose to not claim the trading allowance, and then you could pay £4800 in. This might leave you better off overall; check for yourself.

Interesting. Pay an extra £200 in tax which is then reclaimed as tax relief. Zero sum game. But funds are then wrapped rather than unwrapped, and 25% of it is withdrawable tax free (as rules stand, and assuming it doesn't affect tax banding later on). Net gain since we have a large amount unwrapped. 

QrizB

When I first suggested to my wife (who is self employed) that she could claim fewer expenses so we could pay more into her SIPP, she looked at me as though I was proposing tax fraud

aroominyork

And presumably if I used Marriage Allowance to transfer any of my unused personal tax allowance to my wife, it would have the same counter-productive effect?

QrizB

aroominyork said:

And presumably if I used Marriage Allowance to transfer any of my unused personal tax allowance to my wife, it would have the same counter-productive effect?

I think you'd be OK with that, as you're not affecting her earned income?

aroominyork

Really, even though the Marriage Allowance would reduce her taxable income... and hence there would be less paid tax for her to reclaim through SIPP contributions?

QrizB

aroominyork said:

Really, even though the Marriage Allowance would reduce her taxable income... and hence there would be less paid tax for her to reclaim through SIPP contributions?

It doesn't reduce her income, it increases her personal allowance. That's an important difference.

Dazed_and_C0nfused

QrizB said:

aroominyork said:

Really, even though the Marriage Allowance would reduce her taxable income... and hence there would be less paid tax for her to reclaim through SIPP contributions?

It doesn't reduce her income, it increases her personal allowance. That's an important difference.

It doesn't do that either, it gives her a tax credit (deduction) worth upto £252.

QrizB

Dazed_and_C0nfused said:

QrizB said:

aroominyork said:

Really, even though the Marriage Allowance would reduce her taxable income... and hence there would be less paid tax for her to reclaim through SIPP contributions?

It doesn't reduce her income, it increases her personal allowance. That's an important difference.

It doesn't do that either, it gives her a tax credit (deduction) worth upto £252.

Obviously you're right, my mental shorthand got the better of me