SIPP & Pension guidance - IM Private Clients

[PorkInsider]

Mr Pointy said:

PorkInsider said:

Some great info coming in answers to other people's queries - very useful!

One of my own, Nik (or anyone who knows), if I may...

If I was to make a £50k contribution to my (IM) pension this tax year, so obviously over the £40k max for tax relief, would I need to apply to HMRC for the 20% relief on the excess over the £40k, given that I have unused allowance over the past couple of years, or does it happen automatically still?

I already have to apply for higher rate relief on the contributions I make but obviously the 20% relief relief is automatically added by the fund provider (IM).

Are you employed. a Sole Trader or a Director of a company? Do you already submit a self-assessment return?

I'm an employee. No SA needed at the moment - no qualifying criteria to apply for it.

[markiii]

i beleive you can get tax releif on teh whole 50k, assuming...

1. You've earnt enough this year to have aid tax on 50k
2. You have 10K allowance left from the previous 3 years you can carry

[PorkInsider]

markiii said:

i beleive you can get tax releif on teh whole 50k, assuming...

1. You've earnt enough this year to have aid tax on 50k
2. You have 10K allowance left from the previous 3 years you can carry

Thanks - yes, definitely no issue with having paid enough to claim back from previous years' leftovers, both in terms of the 40k max and the amount of higher rate tax I've paid.

I'm particularly interested in the mechanism of getting back the basic rate rebate when it's dues on contributions over and above the 'usual' £40k per year that pension co's claim back and add to your pension for you automatically.

For example, if I pay in £40k this year, the pension co' claim the extra £10k for me and automatically add that to my pension.

What happens when I pay in £50k, using up some of the cap left from previous years? Can they claim the other £2.5k basic rate tax over the cap for me or is that another wrestle with HMRC?

[Intelligent Money]

PorkInsider said:

markiii said:

i beleive you can get tax releif on teh whole 50k, assuming...

1. You've earnt enough this year to have aid tax on 50k
2. You have 10K allowance left from the previous 3 years you can carry

Thanks - yes, definitely no issue with having paid enough to claim back from previous years' leftovers, both in terms of the 40k max and the amount of higher rate tax I've paid.

I'm particularly interested in the mechanism of getting back the basic rate rebate when it's dues on contributions over and above the 'usual' £40k per year that pension co's claim back and add to your pension for you automatically.

For example, if I pay in £40k this year, the pension co' claim the extra £10k for me and automatically add that to my pension.

What happens when I pay in £50k, using up some of the cap left from previous years? Can they claim the other £2.5k basic rate tax over the cap for me or is that another wrestle with HMRC?

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

[PorkInsider]

Intelligent Money said:

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

Perfect, thanks Nik.

[Stereolab]

Hello all.

I work abroad and my current employer does not have make any contribution to a pension scheme for its employees.

There is a 0% tax rate on my earnings which are 100% derived here- I have no U.K. income.

My partner and our children continue to reside in the U.K. where I have a bank account and mortgage.

Is there anyone at Intelligent Money (or elsewhere) who could advise me with regards to pension provision ?

Thanks.

[markiii]

PorkInsider said:

Intelligent Money said:

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

Perfect, thanks Nik.

one other thing to consider is, the basic rate reclaim presumeably is art of teh contribution from a limit perspective. so he needs to have the ability to contribute 50k plus the basic rate addition?

[Intelligent Money]

markiii said:

PorkInsider said:

Intelligent Money said:

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

Perfect, thanks Nik.

one other thing to consider is, the basic rate reclaim presumeably is art of teh contribution from a limit perspective. so he needs to have the ability to contribute 50k plus the basic rate addition?

Hi Markiii

With the typos/autocorrect I'm not 100% on your question, but I think you are saying that the OP needs enough income to cover the gross contribution, and if so yes he does.

Cheers

Nik

[markiii]

thanks Nik, yes you read through the typos correcty

[Chozza]

Intelligent Money said:

In many cases people will "de-risk" the investment approach as they approach LTA as the reward for taking higher risk for potential higher return is less attractive when a higher return may just lead to a higher tax bill.

Wether or not to stop funding depends on a number of things, such as are where the contributions are coming from, If it is an employer supported plan or company based contributions the tax benefits of the contributions need to be taken into account.

Cheers

Nik

Thanks - i'll do the math. With the employer still contributing ( and unlikely to give money outside the pension scheme ) I suspect de-risking the pension will be the approach to take , and reducing my contributions if necessary. I can then look at more risky stuff outside of the pension

[PorkInsider]

Intelligent Money said:

markiii said:

PorkInsider said:

Intelligent Money said:

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

Perfect, thanks Nik.

one other thing to consider is, the basic rate reclaim presumeably is art of teh contribution from a limit perspective. so he needs to have the ability to contribute 50k plus the basic rate addition?

Hi Markiii

With the typos/autocorrect I'm not 100% on your question, but I think you are saying that the OP needs enough income to cover the gross contribution, and if so yes he does.

Cheers

Nik

I thought it was clear but I'm a bit confused now.

Personally, I do have enough income to cover the contribution I'm considering but I'm curious as to what exactly this might mean for others.

Example: for the past 5 years a person earns £70k p/a gross and contributes £10k into their pension each year.

So now they have, as an unused contribution limit, (4 x £40k) - (3 x 10k) = £130k they can use up this year.

(And for ease, let's assume income tax bands were the same each year (£12.5k 20% / £37.5k 40%))

1. If they decided to pay in £50k this year, they have enough taxed income in this year alone to contribute that amount, but only pay higher rate tax on £20k of their £70k income. Can they can use the previous years of tax paid at 40% to get the higher rate rebate on the full £50k?

2. If they want to contribute £80k this year (again wanting to use previous unused cont. limit) are they actually unable to because their gross pay of £70k this tax year means their taxable income this year is too low, regardless of previous years?

(Hope this makes sense!)

[Intelligent Money]

PorkInsider said:

Intelligent Money said:

markiii said:

PorkInsider said:

Intelligent Money said:

Hi Porkinsider

Your £50k contribution is treated the same as your previous contributions, we will claim the 20% back for you and you claim the additional 20% via your self assessment.

Cheers

Nik

Perfect, thanks Nik.

one other thing to consider is, the basic rate reclaim presumeably is art of teh contribution from a limit perspective. so he needs to have the ability to contribute 50k plus the basic rate addition?

Hi Markiii

With the typos/autocorrect I'm not 100% on your question, but I think you are saying that the OP needs enough income to cover the gross contribution, and if so yes he does.

Cheers

Nik

I thought it was clear but I'm a bit confused now.

Personally, I do have enough income to cover the contribution I'm considering but I'm curious as to what exactly this might mean for others.

Example: for the past 5 years a person earns £70k p/a gross and contributes £10k into their pension each year.

So now they have, as an unused contribution limit, (4 x £40k) - (3 x 10k) = £130k they can use up this year.

(And for ease, let's assume income tax bands were the same each year (£12.5k 20% / £37.5k 40%))

1. If they decided to pay in £50k this year, they have enough taxed income in this year alone to contribute that amount, but only pay higher rate tax on £20k of their £70k income. Can they can use the previous years of tax paid at 40% to get the higher rate rebate on the full £50k?

2. If they want to contribute £80k this year (again wanting to use previous unused cont. limit) are they actually unable to because their gross pay of £70k this tax year means their taxable income this year is too low, regardless of previous years?

(Hope this makes sense!)

Hi Porkinsider,

1) The tax relief claimable is based on the tax position in the tax year of the contribution.
2) They can pay £80k in but they will only get tax relief on £70k

Carry Forward needs to be viewed as two calculations, how much you can pay in and how much qualifies for tax relief.
In most cases where the amount you can contribute exceeds the amount that you can gain tax relief on people decide to only pay in the amount that gains tax relief and delay a further payment until the next year or invest using a different vehicle,

Cheers

Nik

[PorkInsider]

Intelligent Money said:

Hi Porkinsider,

1) The tax relief claimable is based on the tax position in the tax year of the contribution.
2) They can pay £80k in but they will only get tax relief on £70k

Carry Forward needs to be viewed as two calculations, how much you can pay in and how much qualifies for tax relief.
In most cases where the amount you can contribute exceeds the amount that you can gain tax relief on people decide to only pay in the amount that gains tax relief and delay a further payment until the next year or invest using a different vehicle,

Cheers

Nik

All clear.

Thanks again, Nik.

(Wasn't expecting an answer tonight!)

[CoopsIM]

Stereolab said:

Hello all.

I work abroad and my current employer does not have make any contribution to a pension scheme for its employees.

There is a 0% tax rate on my earnings which are 100% derived here- I have no U.K. income.

My partner and our children continue to reside in the U.K. where I have a bank account and mortgage.

Is there anyone at Intelligent Money (or elsewhere) who could advise me with regards to pension provision ?

Thanks.

Good afternoon

Drop me an email at [e-mail] and I'll get this looked into for you. I work with Nik as part of the private client team here at IM, helping behind the scenes

Kindest regards

Coops

[Stereolab]

CoopsIM said:

Good afternoon

Drop me an email at [e-mail] and I'll get this looked into for you. I work with Nik as part of the private client team here at IM, helping behind the scenes

Kindest regards

Coops

Excellent - will do thank you.

[richardxjr]

Liking the new split layout, was a bit bewildering before.

Anyway it's prompted me to send Steve an email too about transferring one of my pensions.

[i4got]

Currently have SIPPS split between IM and HL.

Withdrew £12,500 from mine and wife's SIPPs with HL last year and with no other income expect to eventually pay no tax.

Tax was taken so have to get it back from HMRC.

I understand I can do this by using form P55 but is seems a bit of a faff where I have to list all dividends, untaxed interest, taxed interest, gift aid etc

If I do nothing then I guess I'll get a P800 at some stage and be able to get a refund with a lot less fuss? Maybe September?

Generally how do people handle this on a regular basis. Are people claiming it back (if so how?) or just waiting each year for a refund.

I'll be doing the same again this tax year (staying below the taxable threshold) so want the process to be as slick as possible.

I assume there no way to get my tax code changed so I don't actually pay any tax in the first place when I do the withdrawal from HL?

Thanks.

[Simpo Two]

i4got said:

Currently have SIPPS split between IM and HL.

Withdrew £12,500 from mine and wife's SIPPs with HL last year and with no other income expect to eventually pay no tax.

Tax was taken so have to get it back from HMRC.

I understand I can do this by using form P55 but is seems a bit of a faff where I have to list all dividends, untaxed interest, taxed interest, gift aid etc

If I do nothing then I guess I'll get a P800 at some stage and be able to get a refund with a lot less fuss? Maybe September?

Generally how do people handle this on a regular basis. Are people claiming it back (if so how?) or just waiting each year for a refund.

I'll be doing the same again this tax year (staying below the taxable threshold) so want the process to be as slick as possible.

I assume there no way to get my tax code changed so I don't actually pay any tax in the first place when I do the withdrawal from HL?

It was the same after my first year of modest withdrawals - the pension company deducted 20% at source even though my income was under the threshold. The following year it was automatically refunded by HMRC. So it may be just one of those things.

I take the same amount each year and it goes into the tax return, evidenced by the tax cert from the pension company which now shows it gross, as it should be.

[PM3]

Here is where I started and claimed back tax . https://www.gov.uk/claim-tax-refund
You'll need a gateway ID or previous registered for online tax .
If you don't have a gateway ID set up , it wasn't that bad ...passport and some other ID and a few daft questions online and all sorted out. Set up for myself and them my wife same ....easy ( ish )
TBH it all when quite smooth and got my not insignificant refund in a month and half about ( held up a little because HMRC were missing some information of 83p paid as interest on some account I thought was dead . Yeh really!, but a call with someone about the case once lodged sorted it all out ....they hit the button , and the money came a couple weeks later. The person on the phone was genuinely helpful . Even called back a few hours later as they promised when they had to go check whatever they do on some other system.

Forgot to add , they did suggest just waiting until it all sorts itself out later next ax year , but I said id rather have that chunk now !

[Mr Pointy]

PM3 said:

Here is where I started and claimed back tax . https://www.gov.uk/claim-tax-refund

Thanks for that, I was wondering how to go about it.

Over the years I seem to have ended up with three Government Gateway IDs though...