How much can I pay into a SIPP - Sole Trader

[s2sol]

I've got a SIPP that I've had for a few years, with a modest amount in it. I've also got a much larger amount in ISA's. I now believe that I'm at a stage in life where I don't need to keep relatively easy accessible money handy, so I'd like to start moving money from ISA's into my SIPP. Despite considerable searching, I can't find out how much I can put in each year. I know it's a maximum of my annual income, but because I'm a sole trader, I don't know how much that is until some time after the end of the financial year.

For argument's sake, say I earn £x pa. This year (2019-20) I'll earn a fair amount less than that, but I won't know how much until I complete my return, which I usually do at Christmas. Am I missing something completely obvious, or do I just make an educated guess?

[s2sol]

That's very helpful, thank you. If I put more into a SIPP than I've earned - up to the £40k limit. I'd just lose the tax advantages, then. There's no other penalty?

[s2sol]

theboss said:

Yes, as I understand it (I'm not an IFA or accountant!).

Re moving money from ISA to SIPP - I would think carefully before doing this as it's obviously a one way transaction. Once you have hit the limit on tax relief by virtue of your earned income, it may be disadvantageous to move more. You could end up paying tax twice on it, effectively.

That in itself would be a considerable penalty.

I think I'm in a position where short of my wife deciding she wants a divorce, which is always a possibility, I'm comfortable with the fact that it's a one way transaction. The fly in the ointment is that I've got lazier as I've got older, and my earnings aren't as high as they were. It'll take me longer than I'd like to help myself to the 20% uplift, but I'll manage. Again, thanks for your advice.

[s2sol]

Si1295 said:

It may be me but why are you looking to move tax-free money from your ISA in to a SIPP which you’ll be taxed on (depending on yearly drawings)?

Because as long as I don't move more money than I earn in any one tax year, I'll get 20% added to it by the government. As I've said, I'm of an age where I hope I don't need relatively quick access to big lump sums of money, and I'm happy with the trade off.

[s2sol]

Mr Pointy said:

By April 1st you should know pretty accurately what your profit is for the year - you've got all of your invoices & expenses so you should be able to total them up & even if you only had them for 11 out of 12 months then that would be pretty close. You can then make a payment which whilst not the maximum you could have put in wouldn't be far off.

A better plan is to make a monthly contribution (look up pound cost averaging) with a final payment on April 1st to soak up the unused allowance.

Another alternative is to shift your year end so your accounts are ready before April.

Yes, a couple of good points there. Thanks very much.