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

andys15

QrizB said:

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.

Oh my signature is wrong. That was before my ex wife left me.  I will be working about 3 more years and wage next year will be similar. 

QrizB

andys15 said:

This is what AI says. 

It's wrong. Specifically, it's wrong here:

andys15 said:

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

£70k net is £87.5k gross. Your adjusted income is therefore £102.5k not £120k.

A great example of how AI can give plausible but wrong answers. Answer-shaped errors.

Dazed_and_C0nfused

andys15 said:

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.  

Why would you want your adjusted net income to be £12,570 though 🤔

andys15

Dazed_and_C0nfused said:

andys15 said:

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.  

Why would you want your adjusted net income to be £12,570 though 🤔

I assumed because that’s the tax free money.  So why put tax free money into a pension.  I could pay £152k into my sipp but again I am going with AI saying keep the £10k in cash.  

andys15

DRS1 said:

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?

No.  I cannot touch my pension until 57.  I am going to use other savings to pay myself from 53 to 57. 

DRS1

andys15 said:

DRS1 said:

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?

No.  I cannot touch my pension until 57.  I am going to use other savings to pay myself from 53 to 57. 

Ah OK.  I thought you planned to pay off the mortgage at 53 with a TFLS.  But I see you don't put a date on that.

Isthisforreal99

andys15 said:

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.  

But why do you want to do that? You are losing out on higher rate tax relief by doing so. 

andys15

Isthisforreal99 said:

andys15 said:

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.  

But why do you want to do that? You are losing out on higher rate tax relief by doing so. 

So should I not pay any money into my sipp to get tax back? 

What would you do?  I am paying so much tax on my interest.  Thought i should do this and use my allowance. 

Dazed_and_C0nfused

andys15 said:

Dazed_and_C0nfused said:

andys15 said:

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.  

Why would you want your adjusted net income to be £12,570 though 🤔

I assumed because that’s the tax free money.  So why put tax free money into a pension.  I could pay £152k into my sipp but again I am going with AI saying keep the £10k in cash.  

You have completely misunderstood this.

You don't get basic rate relief added to your pension and then use the pension contributions to reduce your taxable income.

Relief at source pension contributions don't reduce the amount of income you pay tax on, they change the tax rate you pay.  And can restore your Personal Allowance.

Isthisforreal99

andys15 said:

Isthisforreal99 said:

andys15 said:

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.  

But why do you want to do that? You are losing out on higher rate tax relief by doing so. 

So should I not pay any money into my sipp to get tax back? 

What would you do?  I am paying so much tax on my interest.  Thought i should do this and use my allowance. 

I suggest you get some proper advice, if your current advisor cannot advise on the tax implications then find one that can.

And stop relying on AI for financial advice.