£60,000 annual allowance for pension - gross or net?

[Cantabulous]

I've had an inheritance from my DF 😪and the only good thing about it is that it means I can make a decent payment into my pension for once.

This should be a simple question to answer - I hope! What is the maximum cash I can pay in to a SIPP in a year, assuming I earn over £60k (which I do)? Is it:

• £60,000 cash, with the administrator claiming back a further £20,000 as basic rate tax and me claiming back another £20,000 as higher rate tax, or
• £36,000 cash, with the administrator claiming back £12,000 as basic rate tax and me claiming back another £12,000 as higher rate tax?

I think it's the latter, ie gross total is £60,000, but I'm not completely sure.

TIA

It's neither

It's £60,000 including any employer contrubution and the 20% that the pension company reclaims from HMRC

You get the other 20% tax relief on the difference, if you are a higher rate tax payer, via self assessment - it doesn't go in to your pension

I'm self-employed so there's no employer contribution. I know the higher rate tax relief comes to me via SA, not to the SIPP directly, but is that relief also included in the £60,000 allowance - that's my quandary. What you seem to be saying is that I can pay in £48,000 cash, with the administrator claiming the basic rate £12,000 immediately, then I get £12,000 back via self-assessment next year?

Yes, that’s right. When you pay into a SIPP there is an automatic 20% top up. Your payment and the top-up can not be higher than £60k. Then you separately claim back the other 20% on your self-assessment form.

You need to have at least £60k earnings too.

You cannot put more than your yearly earnings. But you can backdate it for 3 years.

Speak to a financial adviser.

'Your payment and the top-up can not be higher than £60k.'

Thank you, this simple statement is what I needed to hear!

'You need to have at least £60k earnings too.'

I should have £60k earnings by the end of this tax year, but I'm going to be very cautious and just drip in the £48k over the year, in line with how my earnings build up, just in case they stop for some reason!

'You cannot put more than your yearly earnings. But you can backdate it for 3 years.'

The carry forward of my unused allowance from the last 3 years is quite complicated and I'm not going to rush to make use of that - by the end of this tax year I will have got advice about it, don't worry. I just wanted a sense check of what I'm planning to do in the next couple of months really.

Thanks all!

Sorry for the loss of your dad OP

If you use carry forward, you need to have had a pension set up already for the year you are carrying forward from. You do not need to have contributed to it in that year though. Just something to look out for. So if you are just setting up a pension for the first time now you won’t be able to use carry forward.

That’s very kind, thank you.

i set up the SIPP in 2021, transferring in a balance from an old private pension. So I think I will have the remainder of the 21/22, 22/23 and 23/24 allowances, which will be sufficient.

I see this has been answered correctly already - it is £48,000, and the SIPP provider will top up the basic rate tax, £12,000

You can then claim any higher rate tax back on your self assessment, which will be cold hard cash you can then spend on gin

No need to speak to a financial advisor, you'd be wasting money

The can calculate how much carry forward you have from various online tools, again no reason to speak to a financial advisor