Reinvesting the free SIPP money

[montecristo]

If I put some money into a SIPP last tax year, and therefore got back some money into that SIPP (the tax rebate), can I use that in this tax year to count as my new £10k for this year, or does the £10k for this year need to be completely new money?

[Jockman]

New tax year, new AIA.

[PurpleMoonlight]

I believe the tax relief credited to your SIPP on last tax years contribution will count towards last years Annual Allowance, not this tax years annual allowance.

[montecristo]

Jockman, yes, I realise it's a new allowance for this year; my question is whether I can fill it with leftover rebate money from last year, or whether I need to provide a new £10k out of my own pocket.

PurpleMoonlight suggests the latter but doesn't seem too sure.

[Jockman]

OP - I think you may also mean your allowance is £10k?? Pension Contributions are actually limitless AFAIK, but tax relief will only be given on an allowance up to £40k.

[Jockman]

montecristo said:

....leftover rebate money from last year....

This is the bit that loses me I'm afraid.

[montecristo]

Jockman said:

OP - I think you may also mean your allowance is £10k?? Pension Contributions are actually limitless AFAIK, but tax relief will only be given on an allowance up to £40k.

Yes, I mean the allowance. Can I just reuse the rebate from last year as my allowance money for this year.

[Jockman]

montecristo said:

Jockman said:

OP - I think you may also mean your allowance is £10k?? Pension Contributions are actually limitless AFAIK, but tax relief will only be given on an allowance up to £40k.

Yes, I mean the allowance. Can I just reuse the rebate from last year as my allowance money for this year.

Surely any rebate has been credited into your SIPP during the last tax year?

You now have a brand new £40k Allowance to put in fresh money. The actual cost if you are higher rate taxpayer is £24k if you are making personal contributions.

[montecristo]

Say I put in £40k into the SIPP last year. It's in stocks.

I get back a % as a rebate into the same SIPP, in cash. I can't remember how much the % is, but say it's 20% so £8k. Sitting there in cash.

So, do I have £48k in my SIPP now OR do I have £40k and a further £8k that I can do what I like with.

If the latter, come the new tax year, can I say please count this £8k as a new deposit for this year (which in turn would be due an additional rebate).

I think now that I write it out, it seems probable that all £48k is in my SIPP and I can't recycle the £8k for rebate purposes, since that money was never taxed.

[gibbon]

Jockman said:

OP - I think you may also mean your allowance is £10k?? Pension Contributions are actually limitless AFAIK, but tax relief will only be given on an allowance up to £40k.

For this financial year the allowance is £10k if you earn over £210k.

[PurpleMoonlight]

You can't treat a tax rebate directly into the SIPP from HMRC as a new contribution upon which you can claim more tax relief.

The tax credit on your £40,000 will be £10,000 by the way.

[montecristo]

Great, thank you all.

[Jockman]

gibbon said:

For this financial year the allowance is £10k if you earn over £210k.

Oh, you sneak....

My assumption about OP may be erroneous.

[gibbon]

Jockman said:

Oh, you sneak....

My assumption about OP may be erroneous.

Never assume old chap.

[walm]

montecristo said:

Say I put in £40k into the SIPP last year. It's in stocks.

I get back a % as a rebate into the same SIPP, in cash. I can't remember how much the % is, but say it's 20% so £8k. Sitting there in cash.

So, do I have £48k in my SIPP now OR do I have £40k and a further £8k that I can do what I like with.

If the latter, come the new tax year, can I say please count this £8k as a new deposit for this year (which in turn would be due an additional rebate).

I think now that I write it out, it seems probable that all £48k is in my SIPP and I can't recycle the £8k for rebate purposes, since that money was never taxed.

I am not sure you have the right answer yet.

It's easier if we assume you are a 40% tax payer and you put in £32,000 to your SIPP last fiscal year (i.e. before this last Tuesday midnight IIRC).
The SIPP provider then applies to the government for an extra 25% of the £32k = £8k.
(The 20% is of the total "contribution" which is now a grossed up to £40k (=32+8).)
That £8k will appear in your SIPP in cash until you invest it in whatever you want, which quite a delay to be honest!

You then put on your tax return that you paid a £40k pension contribution and the HMRC will forgive you a further £8k in tax.
If you paid tax PAYE through the year and got it absolutely correct as if you had ZERO pension contribution then HMRC will send you a cheque for £8k (after next January obviously).

Since we are now in a new tax year, you can take that cheque and put it in your SIPP.
The government will add £2k as before and if you are still a 40% payer you will get another £2k back in Feb-2018.

I think!