Annual Earnings Into SIPP And Tax Relief

SVaz

1. She should have used 80% of her earnings ( if she earned £10k, she puts in £8000 and tax relief should be added by her Sipp making up the balance- usually monthly in arrears or if someone waits right until the end of the tax year to make a lump sum, the relief might go in the next year.
2. If she is a Sole trader then she needs to know why her Sipp hasn’t added the relief.
3. It won’t affect her tax position if she’s a basic rate tax payer - she won’t pay less tax for putting money in her Sipp, it doesn’t work like that for those of us who are Self employed and not a Ltd. Company.

Secret2ndAccount

Since your friend appears to have made a couple of errors with her tax/pension situation, can I check for one more thing…

When she says her earnings are 18k is that her profit, or her takings? If she received 20k, but spent 2k on paper and pencils, then her profit is 18k. 18k would be the number that mattered for her pension (80% of 18k could go into a SIPP). It's in her interest to claim her reasonable expenses as it reduces the tax she owes. She can claim a standard allowance of £1000 if she would prefer, even if her actual costs were little or nothing. She can pay 80% of her profit into a SIPP, not 80% of her takings, unless she claims no expenses at all.

Afternooner

Hello again and thank you for all of your help and advice.

My friend's self assessment has been submitted and she'll get in touch with her SIPP provider next week to sort things out with them.

You've all been brilliant. Thank you.