Help me understand my SIPP and new Tax Code
Discussion
Afternoon,
The HMRC Forum website is offline and the person who did my tax isn't helping. I wanted to post this Anon but cant find a way to do so:
I'm a higher rate tax earner. I pay money into my SIPP and the Platform automatically gives me the basic tax relief of 25%. I then complete my tax return to declare the interest (and the tax I need to pay) on my savings and to inform HMRC of my SIPP contributions in order to get the higher tax relief. Net result is that Im always owed money after Ive paid the tax on my cash savings.
This has worked well for several years and I get a lump sum payment from HMRC eventually.
For 24/25 I made contributions of £26500 into my SIPP, including the 25% relief from the Platform. I received almost £5K this year as a one off payment from HMRC. All good and expected.
However, HMRC have now also changed my tax code to 2591L with a letter informing me I can now earn £25900 before getting taxed. In Augusts wages (wage slip available, paid at the end of the month) I've received an extra £2380 which I'm assuming is back pay for May, June, July, August at my new tax code.
Are HMRC Assuming I will make the same £26500 payment into my SIPP this year and now just giving me the relief monthly rather than a lump sum at the end of April 26? So when I do my tax return we should be at £0 refund and any payment I owe HMRC for my cash savings?
Should I ask my tax code to be returned to the basic 1257L ? I like the idea of getting the extra each month, and it will go straight into my SIPP, but Id rather be in a position that they owe me money at the end of the year. Not me owe them!
Any ideas?! Thank you
The HMRC Forum website is offline and the person who did my tax isn't helping. I wanted to post this Anon but cant find a way to do so:
I'm a higher rate tax earner. I pay money into my SIPP and the Platform automatically gives me the basic tax relief of 25%. I then complete my tax return to declare the interest (and the tax I need to pay) on my savings and to inform HMRC of my SIPP contributions in order to get the higher tax relief. Net result is that Im always owed money after Ive paid the tax on my cash savings.
This has worked well for several years and I get a lump sum payment from HMRC eventually.
For 24/25 I made contributions of £26500 into my SIPP, including the 25% relief from the Platform. I received almost £5K this year as a one off payment from HMRC. All good and expected.
However, HMRC have now also changed my tax code to 2591L with a letter informing me I can now earn £25900 before getting taxed. In Augusts wages (wage slip available, paid at the end of the month) I've received an extra £2380 which I'm assuming is back pay for May, June, July, August at my new tax code.
Are HMRC Assuming I will make the same £26500 payment into my SIPP this year and now just giving me the relief monthly rather than a lump sum at the end of April 26? So when I do my tax return we should be at £0 refund and any payment I owe HMRC for my cash savings?
Should I ask my tax code to be returned to the basic 1257L ? I like the idea of getting the extra each month, and it will go straight into my SIPP, but Id rather be in a position that they owe me money at the end of the year. Not me owe them!
Any ideas?! Thank you
Edited by oldaudi on Sunday 17th August 13:30
Not quite the same here, but I recently moved my SIPP, and the regular monthly withdrawals, which before had been paid gross, were suddenly being paid net and my tax code had collapsed. The reason was because HMRC thought I now had TWO pensions. I rang them up; the girl on the end was very good, instantly understood what had gone wrong and fixed it.
Thanks . I’m not withdrawing and still paying in. If my assumption is correct about them paying the tax relief upfront, it’s too much , the numbers don’t make sense and there is variable regarding the tax I have to my on my cash savings…….
I’m happy to contact HMRC but I don’t really know the right questions to ask at the moment !
I’m happy to contact HMRC but I don’t really know the right questions to ask at the moment !
They will adjust your tax code to take account of pension contributions, although in my experience it’s never enough and so they always owe.
On your tax return there’s a this is a one off contribution tick box which I assume will stop this.
My tax code has never been that close to my gross contributions and I wouldn’t want it to be to take account of variability.
Sounds like a conversation is needed.
Oddly this year they adjust my tax code to be about spot on after I did my self assessment and then promptly changed it again a week later. So again next year they will owe me money.
On your tax return there’s a this is a one off contribution tick box which I assume will stop this.
My tax code has never been that close to my gross contributions and I wouldn’t want it to be to take account of variability.
Sounds like a conversation is needed.
Oddly this year they adjust my tax code to be about spot on after I did my self assessment and then promptly changed it again a week later. So again next year they will owe me money.
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