Using carry forward

Marcon

DRS1 said:

deepam said:

1. Its very simple question. I am making 150% of my salary contribution into my SIPP. I have no employer or workplace pension.
2. I was wondering this because I contribute before the announcement.

I am being dense but how can you contribute 150% of your salary to a SIPP?

By using carry forward - assuming OP has scope/adequate earnings to do so in the tax year and isn't subject to tapering, hasn't triggered the MPAA etc. The question is hopelessly short on essential detail.

DRS1

Oh and when did you set up this SIPP?  Did you actually have a pension in the past three tax years?  Are you sure you have any allowance to carry forward?

As to the possible change to pension contribution relief I am surprised no-one has told you not to act on speculation.  If your salary only gets you marginally into higher rate then a 30% credit could be very good news for you.

However if you are in the band just over £100k then make sure you contribute at least enough to get you under that £100k.  That is where the personal allowance starts to vanish and is effectively a 60% tax band.  Well worth avoiding that if you can. 

deepam

I said no employer contribution to make my question simple. I have had workplace pension for last 25 years.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

DRS1

Marcon said:

DRS1 said:

deepam said:

1. Its very simple question. I am making 150% of my salary contribution into my SIPP. I have no employer or workplace pension.
2. I was wondering this because I contribute before the announcement.

I am being dense but how can you contribute 150% of your salary to a SIPP?

By using carry forward - assuming OP has scope/adequate earnings to do so in the tax year and isn't subject to tapering, hasn't triggered the MPAA etc. The question is hopelessly short on essential detail.

But you cannot get tax relief on more than your earnings.  I accept that I am assuming he is using salary to mean taxable earnings.

If his taxable earnings for 25/6 are £90k he can't contribute gross £135k to the SIPP can he (even if he had £75k annual allowance to carry forward from past years)?

Maybe the employer could if there is one.

Marcon

deepam said:

I said no employer contribution to make my question simple.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

Trying to 'keep your question simple' by leaving out important facts has had quite the opposite effect, I'm afraid.  

You can't use carry forward until you've used up this year's allowance of £60K, either by personal contributions + basic rate tax relief; and/or employer contributions (which could include any made by salary sacrifice).

If your salary is only £50K you aren't going to get higher rate tax relief on contributions of £75K in any case, since you'll have paid little or no higher rate tax in the first place (depending on whether you have other income such as dividends or savings interest which is taxable).

Are you sure you have scope for carry forward at all, given your earnings level (and assuming no employer contribution, based on your question)? The fact you've made no contributions to your SIPP is neither here nor there; you need sufficient earnings in the tax year you make  personal contributions to cover any carry forward you are trying to use.

Dazed_and_C0nfused

deepam said:

I said no employer contribution to make my question simple.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

You should have told us all that to start with, like you said before, it really is quite simple 🙄

DRS1

deepam said:

I said no employer contribution to make my question simple. I have had workplace pension for last 25 years.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

I know I am thick but if I assume your salary is £50k then you don't pay 40% tax.  Unless you have other income.

Marcon

OP - what is your gross earned income from employment for this tax year (ie excluding savings interest, dividends, rental income etc).

dunstonh

deepam said:

I said no employer contribution to make my question simple. I have had workplace pension for last 25 years.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

That answer has not simplified it.

If you earn £50k, you do not earn enough to utilise carry forward unless employer contributions are available.

However, if your salary was £50k, then you won't be a higher-rate taxpayer unless you have no personal allowance.

To make an employee pension contribution of £75k, you would need to have a salary of £75k or higher.

Marcon

dunstonh said:

deepam said:

I said no employer contribution to make my question simple. I have had workplace pension for last 25 years.

I have never made any contributions in a SIPP so I do have carry forward from last 3 years. I have the money from my savings/ ISA etc. I understand I can only make taxable salary. Imagine my salary is 50K to make calculations simple. And I want to contribute 75K into a SIPP. My question is that I will get tax relief - 40% of 75K?

However, if your salary was £50k, then you won't be a higher-rate taxpayer unless you have no personal allowance.

They could if they had taxable income from sources other than earnings.

OP - maybe read https://www.hl.co.uk/pensions/contributions/carry-forward-rule or look at your own SIPP provider's website?