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Can I invest the maximum in my SIPP before the end of the tax year?

(5 Posts)
OnlyTeaForMe Sun 22-Oct-17 18:22:02

I earn a £10k salary from a family business, and as DH & I don't need it for day to day expenses, I always invest it in my SIPP to get the maximum 20% tax relief.

In the past I've always kept the cash in a savings account and waited until just before the end of the tax year to transfer the whole lump sum into my SIPP and then the tax relief gets reclaimed in one 'lump' rather than in dribs and drabs.
However, I have over £10k in savings now anyway, and with interest rates so low, I'm wondering if there is anything to stop me just putting £10k in my SIPP now?
Do you have to already have earned the salary to put it in, or is it OK to contribute based on the assumption that you WILL earn that amount in the tax year?

Anyone know?

Winebottle Sun 22-Oct-17 21:00:57

There is nothing stopping you doing that.

Income tax is calculated on an annual basis so tax relief is calculated on an annual basis.

Obviously if it turns out that you didn't earn enough, you lose the tax relief on the excess.

OnlyTeaForMe Mon 23-Oct-17 10:05:05

Thank Winebottle.

You said ' if it turns out that you didn't earn enough, you lose the tax relief on the excess' - how would that work in practice, since the tax relief might already have been collected by my SIPP provider - would it just be collected in arrears the following tax year via my self-assessment tax return?

Winebottle Mon 23-Oct-17 18:00:40

No. You would need to tell your SIPP who would then pay it back to HMRC.

JoJoSM2 Thu 09-Nov-17 16:13:22

If you earn 10k a year, you don’t pay income tax, do you? How do you get relief on tax you’ve never paid? I’m genuinely confused.

As a principle, though, you can pay it with any frequency you’d like. As savings accounts have terrible interest rates, it probably makes more sense to just stick it into your sipp.

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