Using SIPP to reduce taxable income - how much to pay in?

jackthelab

Hi,

Long time lurker, first time poster.

I'm about to make a contribution to a SIPP to reduce my total taxable income below £100k and would appreciate some advice on how much to pay into the SIPP because I've had two views.

The situation is (with rounded numbers):
Taxable pay from employer 1: £44,000
Taxable pay from employer 2: £71,400
Savings interest (excl ISA interest): £710
Dividends: £280
BIK for benefitial loan from employer 1: £2,000 (estimate until I get my P11D but have been generous to make sure it's enough)
TOTAL TAXABLE INCOME: £118,390

Do I need to deposit £18,400 into the SIPP or do I put in £14,720 and when the SIPP provider applies 20% tax relif the total is £18,400?

Bonus question. Do I need to do Self Assessment (SA) to get the additional rate tax relief and sort out any overpaid tax? My tax code for the year end is SK72X. I know I need to notify HMRC of the SIPP contribution but wonder if SA will sort everything out more quickly? If I don't do SA then I think I need to do the SIPP notification and then wait for a P800 calculation. My last P800 was done in January and I got a refund, ideally I'd like to get the tax relief and any overpaid tax back sooner.

My pension contributions from both employers were salary sacrafice so are already factored into my taxable pay, plus I have enough space in my annual pension allowance to make a contribution of £18,400 (if that's how much I need to put in).

Thanks in advance

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6660609/using-sipp-to-reduce-taxable-income-how-much-to-pay-in

You cannot contribute to a SIPP to reduce your taxable income.

Do you mean you want to reduce your adjusted net income?

And making relief at source pension contributions isn't a reason to need to file a tax return, you can claim any additional relief due here.

https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

DRS1

As long as the SIPP works on the relief at source basis for contributions (I think they all do but don't rely on that if in doubt ask them to confirm it) then you contribute £14720 and the tax relief tops that up to £18400 and you put £18400 in your tax return as the gross contribution. I assume the online form works the same way as the self assessment tax return but I have never filled it in so I don't know for sure.

jackthelab

https://forums.moneysavingexpert.com/discussion/comment/81931014#Comment_81931014

Thank - yes I did mean adjusted net income and I'll claim the tax back via that form.

https://forums.moneysavingexpert.com/discussion/comment/81931103#Comment_81931103

Thanks - the provider is relief at source so gone with that amount.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81931261#Comment_81931261

Remember you will get a triple benefit.

1. The basic rate relief the pension company add to your pension fund

2. Retention of some or all of your Personal Allowance

3. An increased basic rate band