The Lemon Fool

Morning All.

My wife and I have each contributed an additional £12K to our SIPPs this year (yes, I'm aware of the £40K or so annual limit - we should be fine on that). I understand that II, who are our "brokers", gross that up directly by £3K to £15K each, covering lower rate tax.

My question is does anyone have experience of completing an Inland Revenue self-assessment form for reclaiming the higher rate tax of SIPP contributions (also around £3K I understand in each of the examples given)? Is it simple and do I base the reclaim on £12K, as I would expect, or £15K?

Regards, Newroad

See Box 1 Page TR4 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874083/sa100_English_Form.pdf

Payments to registered pension schemes where basic rate tax relief will be claimed by your pension provider (called ‘relief at source’). Enter the payments and basic rate tax.

In other words enter the amount paid grossed up by the basic rate (your £15,000).

Your pension provider doesn’t exactly gross up though. They should in due course credit your SIPP with the £3,000.

Thanks, PinkDalek.

Yes, my explanation of the £12K to £15K was perhaps simplified.

More importantly, thanks for the advice on which amount to enter in Self Assessment!

Regards, Newroad

Do you already fill in a self assessment (SA), or will you be doing it just for the purposes of claiming higher rate relief on your SIPP?

If the latter, you can avoid the SA and simply contact the tax office and they will adjust your tax code for the following year (just done this myself).

NotSure wrote:Do you already fill in a self assessment (SA), or will you be doing it just for the purposes of claiming higher rate relief on your SIPP?

If the latter, you can avoid the SA and simply contact the tax office and they will adjust your tax code for the following year (just done this myself).

Adjusting the following year's PAYE code may not result in the correct amount of higher rate tax relief if the income is different in the two tax years.

Adjusting the following year's PAYE code may not result in the correct amount of higher rate tax relief if the income is different in the two tax years.

Indeed, but as I understand it, you have to claim the previous year's relief in the current year - you end up getting relief a year in arrears. This is mainly true for SA too though - you cannot post a claim in advance for pension payments not yet made. SA may end up being slightly quicker, but more effort involved.

bluedonkey wrote:Adjusting the following year's PAYE code may not result in the correct amount of higher rate tax relief if the income is different in the two tax years.

NotSure wrote:Indeed, but as I understand it, you have to claim the previous year's relief in the current year - you end up getting relief a year in arrears. This is mainly true for SA too though - you cannot post a claim in advance for pension payments not yet made. SA may end up being slightly quicker, but more effort involved.

NotSure what you are saying here but I may be misunderstanding.

If I were to subscribe to my SIPP during 2020-2021 I'd claim the Higher Relief Relief when I submit my tax return at some stage during 2021-2022. I then receive full relief in the tax calculation for 2020-2021, albeit that calculation arrives in the next tax year, if that's your point, but that's not really a year in arrears.

This is mainly true for SA too though - you cannot post a claim in advance for pension payments not yet made.

What you can do is request an adjustment to the suggested payments on account to take into account the pension contribution.

PinkDalek wrote:What you can do is request an adjustment to the suggested payments on account to take into account the pension contribution.

Thank you PinkDalek. I was just repeating what an accountant told me after I recently sought advice on this - I have just claimed a rebate for several years up to, but not including, the tax year that ends very shortly (2020/2021).

I was planning (on the accountant's advice) to shortly contact the tax office regarding this year (2020/2021) but from you say, I can also let them know in advance of the contributions I will be making in 2021/2020? Or is that just if I fill in an SA?

Apologies if I have caused any confusion.

I really don't know much about the non Self Assessment system*** but have seen https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief which includes (my underlining) and confirms what you already know:

Claim tax relief in England, Wales or Northern Ireland

You can claim additional tax relief on your Self Assessment tax return for money you put into a private pension of:

20% up to the amount of any income you have paid 40% tax on
25% up to the amount of any income you have paid 45% tax on

You can also call or write to HMRC to claim if you pay Income Tax at 40%.

If you've already subscribed in 2020-2021 then presumably you can inform HMRC.

I don't know what they would say re 2021-2022 as to whether or not they'll amend your Notice of Coding in advance of subscribing.

*** Others here will though and I am reasonable sure I've seen comments on how that works in practice (but to find those threads will be well nigh impossible).

Hi Pink Dalek.

I wonder what the situation would (will?) be in the case where

Personal Contribution in FY20/21, but
Relief at Source for the above actually paid into II account in FY21/22

This is likely to be the case for us (depending on how fast the Relief at Source gets done - any more than about six weeks would make it this way for us) and may be what NotSure was musing on.

Anything other than counting it as part of FY20/21 would be tricky/odd (and that is how I will treat it now) but who knows what HM Customs and Revenue might ultimately require?

Regards, Newroad

Newroad wrote:I wonder what the situation would (will?) be in the case where

Personal Contribution in FY20/21, but
Relief at Source for the above actually paid into II account in FY21/22

...

As you suggest, it is the date of the pension contribution that is relevant. See the futurish tense in:

Payments to registered pension schemes where basic
rate tax relief will be claimed by your pension provider
(called ‘relief at source’).[/u] Enter the payments and basic
rate tax.

The date the basic rate relief appears in the pension pot not being important.

Newroad wrote:I wonder what the situation would (will?) be in the case where

Personal Contribution in FY20/21, but
Relief at Source for the above actually paid into II account in FY21/22

It's normal. PD has already answered the substance, but for completeness - Pension Admins report to HMRC all payments in up to ( and I think including ) the 5th of the month. Tax relief is then paid out by HMRC on the 21st of the month following the report. So pay in on 4 March, tax relief credited 21 May. Last day to pay in to get relief in the same FY is left as an exercise for the reader.

Thanks PinkDalek and Genou.

Our contributions were made late February, so I'm guessing on the logic outlined, relief at source credited on or around 21st April. And claim higher rate relief for FY 20/21 (during FY 21/22).

As an aside, my guess is that 5th of the month is included (only because 6th April is the new financial year) - not that Pope Gregory XIII would have thought this far ahead

Regards, Newroad

Hi All.

A follow up question ... if I contribute £12K pa to a SIPP, get £3K lower rate relief paid into the SIPP and then get a £3K reduced tax bill, is the amount that counts towards my £40K gross annual allowance:

1. £12K
2. £15K
3. £18K
4. Another sum?

Regards, Newroad

Newroad wrote:Hi All.

A follow up question ... if I contribute £12K pa to a SIPP, get £3K lower rate relief paid into the SIPP and then get a £3K reduced tax bill, is the amount that counts towards my £40K gross annual allowance:

1. £12K
2. £15K
3. £18K
4. Another sum?

Regards, Newroad

The gross contribution is £15k since that is what has actually gone into your pension.

Cheers, Ursaminortaur.

That's a good answer - I have about £17K headroom this coming year, so would have had to cutback if not.

Regards, Newroad

Morning, All.

The answers kindly given to me on this thread helped me tremendously in 2021 - thanks again to those who gave them (including, I believe, Pink Dalek who may no longer be with us). Others may benefit from them again now as we approach tax return submission season.

I have a second follow up question, should anyone care to and be able to answer it. Currently, Mrs Newroad and I each plan to contribute £38.5K to our pensions this year (a combination of employer pre-tax and personal post-tax contributions).

In the event our salaries do/have increased and/or we get bonuses, it may be that the annual contribution tips over the £40K mark.

There are various adjustments we might make in advance to avoid going over the £40K mark, but if we cannot do so in time, does anybody know the correct way, on a tax return, to allocate the over £40K piece to unused capacity in the previous (three?) tax years?

Regards, Newroad

Newroad wrote:Morning, All.

The answers kindly given to me on this thread helped me tremendously in 2021 - thanks again to those who gave them (including, I believe, Pink Dalek who may no longer be with us). Others may benefit from them again now as we approach tax return submission season.

I have a second follow up question, should anyone care to and be able to answer it. Currently, Mrs Newroad and I each plan to contribute £38.5K to our pensions this year (a combination of employer pre-tax and personal post-tax contributions).

In the event our salaries do/have increased and/or we get bonuses, it may be that the annual contribution tips over the £40K mark.

There are various adjustments we might make in advance to avoid going over the £40K mark, but if we cannot do so in time, does anybody know the correct way, on a tax return, to allocate the over £40K piece to unused capacity in the previous (three?) tax years?

Regards, Newroad

The way carry-forward works is that the first £40,000 uses up this year's allowance. Larger contributions then start using up any unused allowance from the previous three years starting with the oldest year and gradually moving forward thus you don't need to specify the years on your self assessment form.
If you don't contribute (and earn) enough extra to use up all the unused allowance from the oldest year then what is left won't be available next year as it will then be the fourth year and no longer eligible for carry-forward.

Thanks both

[Ursaminortaur] Am I right then that you simply complete a/the section of the tax return saying you wish to allocate pension contributions against a previous tax year (implying that you will be over £40K in the current tax year) and that the Inland Revenue handle the rest of the calculation - with the exception of if you breach the remaining limit for the previous three years (in which case, they'd presumably advise somehow)?

Sorry if the above is unclear, I hope you get the intent of the question.

Regards, Newroad

Newroad wrote:Thanks both

[Ursaminortaur] Am I right then that you simply complete a/the section of the tax return saying you wish to allocate pension contributions against a previous tax year (implying that you will be over £40K in the current tax year) and that the Inland Revenue handle the rest of the calculation - with the exception of if you breach the remaining limit for the previous three years (in which case, they'd presumably advise somehow)?

Sorry if the above is unclear, I hope you get the intent of the question.

Regards, Newroad

I believe so. I haven't needed to fill in a self assessment form since I retired early in 2017 so don't know exactly which boxes you need to fill in on the latest self assessment form. But HMRC have all the information they need to reconcile your contribution with carried-forward unused allowances once you tell them how much you contributed this year.

( Way way back there used to be something called carry-back where unlike carry-forward you actually filled up past years and you had to specify which particular year you were filling up but that was stopped either at or shortly after A-day in 2006).