Topping up my SIPP using unused allowances from previous 3 years pension contributions

Dazed_and_C0nfused

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

Correct.  If your adjusted net income is £125,140 or more you will have lost all of your Personal Allowance and have the 60% scenario affecting you.

andys15

Dazed_and_C0nfused said:

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

Correct.  If your adjusted net income is £125,140 or more you will have lost all of your Personal Allowance and have the 60% scenario affecting you.

Thanks dazed.  So would you say it’s best to pay £141k this tax year.   How much would I effectively get in that situation and will I get the tax I have paid on my interest back too.  

Isthisforreal99

andys15 said:

Dazed_and_C0nfused said:

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

Correct.  If your adjusted net income is £125,140 or more you will have lost all of your Personal Allowance and have the 60% scenario affecting you.

Thanks dazed.  So would you say it’s best to pay £141k this tax year.   How much would I effectively get in that situation and will I get the tax I have paid on my interest back too.  

Why £141k?  Your immediate goal should be to get your Net Adjusted Income down to £99,999 which will get your personal allowance back and eliminate 45% tax and the '60% tax trap' - then do the same the following year.

Dazed_and_C0nfused

andys15 said:

Dazed_and_C0nfused said:

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

Correct.  If your adjusted net income is £125,140 or more you will have lost all of your Personal Allowance and have the 60% scenario affecting you.

Thanks dazed.  So would you say it’s best to pay £141k this tax year.   How much would I effectively get in that situation and will I get the tax I have paid on my interest back too.  

It's difficult to say what the best overall outcome would be across two tax years without knowing the full details of your taxable income and any other relevant details.

But avoiding the 60% trap would likely be a good start.

But you then start getting just 40% relief on some of the contributions and possible even just 20% on some of your £141k is a net figure before basic rate relief is added.

You will get some savings nil rate band (aka Personal Savings Allowance) by dropping down from being an additional rate payer but that isn't a huge saving to be honest.

andys15

Isthisforreal99 said:

andys15 said:

Dazed_and_C0nfused said:

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

Correct.  If your adjusted net income is £125,140 or more you will have lost all of your Personal Allowance and have the 60% scenario affecting you.

Thanks dazed.  So would you say it’s best to pay £141k this tax year.   How much would I effectively get in that situation and will I get the tax I have paid on my interest back too.  

Why £141k?  Your immediate goal should be to get your Net Adjusted Income down to £99,999 which will get your personal allowance back and eliminate 45% tax and the '60% tax trap' - then do the same the following year.

So if I get paid £190k.  Then if I pay £141k, then £177k will be paid gross into my SIPP, which takes my net income down to £12570. 

Is that right in my assumptions.  

QrizB

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

There's a lot of missing info so I can't be certain, but if you're earning £191k gross in England then the MSE tax calculator says you'll take home £113k. You'll pay £72k in tax and £6k in NI.

• If you contribute £141k into a relief-at-source pension, that'll receive 20% tax relief and be grossed up to £176.25k. You'll get your Personal Allowance back, pay £435 in tax and the same £6k in NI.
• If you contribute £71k into a relief-at-source pension, that'll receive 20% tax relief and be grossed up to £88.75k. You'll get most of your personal allowance back, pay £29k in tax and the same £6k in NI.

Over two years, then:

• Making a one-off payment of £141k means paying £72k + £435 in tax.
• Making two £71k payments means paying £29k + £29k in tax.

Splitting over two years means paying ~£14k less in tax.

This is a very simple model and there might be more options to play with - that's why you have an IFA - but illustrates the point.

andys15

QrizB said:

andys15 said:

QrizB said:

andys15 said:

He isn’t aware of the tax element.  He is suggesting doing it over 2 financial years but surely doing it over 1 makes sense for the 60% tax.  

He's got a point.

Making a pension contribution large enough to get you out of the 45% band for two years in a row (his suggestion) is a better outcome than getting out of the 45%, 40% and 20% bands for a single year (your suggestion).

Thanks.  But because I don’t get any personal allowance does that not effectively mean I am paying 60% tax. If I split it over two years then I don’t get below the £125k.  I am not great at this though. 

There's a lot of missing info so I can't be certain, but if you're earning £191k gross in England then the MSE tax calculator says you'll take home £113k. You'll pay £72k in tax and £6k in NI.

• If you contribute £141k into a relief-at-source pension, that'll receive 20% tax relief and be grossed up to £176.25k. You'll get your Personal Allowance back, pay £435 in tax and the same £6k in NI.
• If you contribute £71k into a relief-at-source pension, that'll receive 20% tax relief and be grossed up to £88.75k. You'll get most of your personal allowance back, pay £29k in tax and the same £6k in NI.

Over two years, then:

• Making a one-off payment of £141k means paying £72k + £435 in tax.
• Making two £71k payments means paying £29k + £29k in tax.

Splitting over two years means paying ~£14k less in tax.

This is a very simple model and there might be more options to play with - that's why you have an IFA - but illustrates the point.

Thankyou.  I am getting my information from AI. It seems that it cannot be trusted. 

QrizB

andys15 said:

Thankyou.  I am getting my information from AI. It seems that it cannot be trusted. 

I'd trust experienced MSE forumites (not me, specifically - folk like dunstonh or Dazed_and_Confused) over AI, and your personal IFA over any of us.

I have assumed that you're going to continue working, and earning £191k pa or so, into 2026/27 at least. If you intend to retire on 19/05/2026 as stated in your signature then my calculations are likely to be wrong.

andys15

This is what AI says. 

Splitting the payment across two tax years (roughly £70k in the current 2025/26 year and £70k in May 2026/27) is a very different strategy. It prioritizes immediate cash flow over maximum tax efficiency.

While it feels safer to keep more cash now, it will likely cost you roughly £15,000 to £20,000 in lost tax refunds.

Here is the breakdown of what happens if you split the payment:

1. The "Lost" 60% Opportunity

Tax relief is calculated per year. To get that massive 60% relief, you have to bring your income below £125k in that specific tax year.

• If you pay £141k now: You bring your £190k income down to £12k. You reclaim your entire Personal Allowance.

• If you only pay £70k now: Your "Adjusted Income" stays at £120,000.

• You are still in the 60% trap for £20,000 of your income.

• You still lose roughly £10,000 of your Personal Allowance.• You will still owe HMRC thousands in tax for the current year.

DRS1

On a slightly different tack.  You seem to be assuming you can take a TFLS out of the SIPP when you are 53.  Are you sure about that?  Do you have a protected minimum pension age with this SIPP?