Quick SIPP question

[rfisher]

If you have no relevant earnings for tax relief on a pension contribution, you can still put £2880 into a SIPP and get tax relief from HMRC of £720 to make the maximum allowed contribution of £3600.

However, what happens if you are a 40% income tax payer?

Do you put £2150 in and get £1440 tax relief (excuse probably not correct maffs)?

Or is 20% tax relief the upper limit?

[Mr Pointy]

As I understand it it's never the case that you reduce your contribution by the additional 20%, you claim that back through your tax return. So in your case you still pay in £2880.

[Somebody]

Or if early in the tax year you can inform HMRC the gross contributions you are making and ask them to make the coding adjustment so you get the additional 20% relief.

Whether you go the tax code route or claim the additional 20% via your self-assessment, you pay over the £2,880 nett to the provider who will claim the £720 25% tax relief top up.

Edited by Somebody on Saturday 7th May 16:48

[LeoSayer]

If you have no relevant earnings then the maximum you can contribute per year is £3600 with 20% tax relief.

[rfisher]

LeoSayer said:

If you have no relevant earnings then the maximum you can contribute per year is £3600 with 20% tax relief.

OK thanks for confirming the rules for this oddity .

[PistonHead007]

No higher rate tax relief on the £3,600 because you haven't paid higher rate tax on relevant UK earnings.