SIPP - practical question

londonrugbyboy

Hi

I have a practical question regarding reinvesting tax relief back into my SIPP. Grateful for any help, as I can't find the answer elsewhere on-line. Apologies in advance if this has already been answered elsewhere.

My situation is this:

1. I am a higher-rate (40%) tax payer who contributes regularly into a SIPP.
2. Via my HMRC self-assessment tax return, I have reclaimed the extra tax relief I am allowed based on the SIPP contributions I have made.
3. HMRC has paid me the extra tax relief I am owed.

So far, so good.

I understand I can reinvest that extra tax relief back into my SIPP.

My question is - how should I classify that "extra tax relief" with my SIPP provider? Do I declare it as a "Personal Net" contribution or a "Personal Gross" contribution?

Any help on this would be greatly appreciated.

londonrugbyboy

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/6653671/sipp-practical-question

It's a tax refund, i.e. your cash and it's still a net contribtion that would attract further 20% tax relief at source and then you would claim further higher rate relief.

El_Torro

Technically you can't reinvest the tax relief. This is money provided to you by HMRC as a refund for paying too much tax the year before. You can only put earnings into a pension and a tax rebate does not count as earnings.

However there is nothing stopping you increasing your pension contributions, as long as you are not putting more than your gross earnings this year into the pension. This can be done as a one off payment, or by asking your employer to up your contributions.

Secret2ndAccount

You've received a tax refund. It's money in the bank. Therefore it is a cash contribution, eligible for the 20% uplift, and potentially eligible for more 40% relief in due course, if you earn enough.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6653671/sipp-practical-question

You're overthinking this.

It would just be a new contribution, exactly the same as the original one, just made in a different tax year.

Other than for your own personal records you wouldn't be making any reference to "extra tax relief" anywhere, least of all with the pension company. That would just be a recipe for complete confusion.

dunstonh

I understand I can reinvest that extra tax relief back into my SIPP.

sort of. Your pension contribution is the gross amount. If you decide to invest the higher rate relief received, then that would be a new pension contribution.

My question is - how should I classify that "extra tax relief" with my SIPP provider? Do I declare it as a "Personal Net" contribution or a "Personal Gross" contribution?

Pension contributions are gross. You pay the net of basic rate tax amount.

The key is that you are not "reinvesting" the higher rate relief. You are making a new contribution.

Albermarle

1. HMRC has paid me the extra tax relief I am owed.

Just for info, normally after the first claim, HMRC assume you will make the same level of contribution in the following tax year (s) and adjust your tax code accordingly. So will you pay less tax each month, rather than get a later refund. Of course if you make a different level of contribution, it will have to be further adjusted for.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81869584#Comment_81869584

Although that doesn't always happen if the relief is claimed via a Self Assessment return, as in this case.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81869613#Comment_81869613

OK, but it is what happened to me when I was working and filling in a self assessment. I had a tax code of something like £23K due to the pension contributions and being a 40% taxpayer, if I remember rightly. Maybe it has changed,

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81869749#Comment_81869749

No, it can still happen like that, it just doesn't always happen.