Higher Rate Tax Relief SIPP

sometime_soon

edited to add Self Employment income £90k
Hello. Hoping someone can offer some experience of entering SIPP on self assessment? This is the first time for paying a SIPP and so just filing my self assessment. I have entered the payments in the tax relief section £60k, and this obviously then increases my basic rate allowance.
Seems straightforward but the bit that I don’t quite understand is the “extra 20%” as a higher rate tax payer.
Does this not show in the end calculation and is just then calculated later as a refund / rebate?
I understand ( hopefully ) it is only the amount over the higher tax threshold ( so the amount above £50,270) but just wasnt sure if it shows in the calculation? Thanks for any input in advance.

Isthisforreal99

It does exactly as you describe, extends the basic rate band, which may or may not generate a tax repayment depending on your individual circumatances. It won't explicitly show a credit

sometime_soon

https://forums.moneysavingexpert.com/discussion/comment/82046303#Comment_82046303

Thankyou. Sorry yes for clarity

£90k earnings and £60k pension paid -

so it was the extra 20% portion as HR tax payer, above the threshold, that threw me out. I understand it has to be claimed but just didn’t understand if this showed up in the calculations as opposed to just wait for HMRC to rebate / refund etc?

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82046317#Comment_82046317

What does the calculation show as the net position - must show some overpayment calculated?

sometime_soon

https://forums.moneysavingexpert.com/discussion/comment/82046326#Comment_82046326

No . It shows obviously the basic rate was extended by £60k. So the full amount of tax and ni due is calculated on that amount.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6673760/higher-rate-tax-relief-sipp

There is no "extra 20%".

Your basic rate band is increased by the gross contribution, potentially reducing the amount of tax paid above 20% and increasing the amount that is paid at 20%.

sometime_soon

I understood, 20% automatically added into SIPP pot. As higher rate tax payer, additional 20% is claimed through self assessment???

So I wasn’t sure if the calculation shows this or not??

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82046354#Comment_82046354

Just noted from your previous posts that you are self-employed and not employed, your reference to earnings made me assume you were employed.

In which case your tax has been calculated extending the basic rate band by 60k meaning all your profits will have been taxed at 20% rather than those above £50270 at 40%.

That's it, you have saved 20% tax on profits above the higher rate threshold.

SacredStephan

So the full amount of tax and ni due is calculated on that amount.

NI is calculated based on your pay in a pay period, e.g. week/month. A personal pension contribution made after the pay period has no effect on this calculation.

Edit: just noticed you are not on PAYE, I still think that a pension contribution would not affect your NI.

QrizB

If your tax situation is as simple as you've said here - earned £90k via PAYE, paid £48k net / £60k gross into a relief-at-source pension scheme - then when you get to the tax calculation at the end of the self-assessment process you'll find your basic rate band now extends an extra £60k to ~£110k.

You'll be due a refund of any higher-rate tax paid by PAYE on your ~£40k of earnings over £50270. So something like £8k.

sometime_soon

https://forums.moneysavingexpert.com/discussion/comment/82046387#Comment_82046387

Sorry Not PAYE. Self employment income £90k

SIPP payments £60k