SIPP advice - to reduce net adjusted income to below 100k.

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Hi all,

Theoretically - if my overall taxable income (according to HMRC online) is 105,000 for this tax year, am I correct in thinking that I need to contribute £5,000.01 to my SIPP in order to bring my net adjusted income below 100k?

My employer makes automatic pension deductions from my income but I believe that this is not included in the taxable income total.

I know that this should be simple but I'm worried I've missed something and am going to get it wrong, with only a few days before the end of the tax year. Before anyone suggests it - I know it would probably make sense for me to seek advice from an accountant/IFA but this is my first year earning above 100k, it wasn't really expected, and I've left things a little late!

I hope this post does not offend anyone as it is a genuine question and I know that I am in a fortunate position.

Many thanks in advance.

Congratulations! Suggest you ask HR/Payroll how to do this. It shouldn't be difficult and they should have experience.

Sorry I can't help but Following.
Not for me unfortunately but my DH.

I did find this by googling but I am not an IFA!!!

https://www.bestinvest.co.uk/sipps-and-junior-sipps/understanding-sipp-tax-relief-and-benefits

Thank you!

To clarify, my SIPP is with a private provider rather than through my work pension, so I think I have to sort it myself.

Call your provider and see if you can make a payment in tomorrow, some require you to go through a ifa though, it depends. You have left it very late. Nice problem to have though

No need to contact a financial advisor. Look at your payslip and it will tell you how much your gross income is year to date. Assuming your March pay will be the same as previous months then add that on and it is your gross income for the year.

Most SIPPS are ‘relief at source’ so basic rate tax automatically gets added. So if you want to add in £5000 in total, you pay in £4000 and the SIPP will get automatically credited with a further £1000 (this usually takes 6 weeks or so).

Also make sure you include this in your self assessment tax return for 24/25 to claim back the additional 40% tax.

If you get deductions from your salary for your pension, have you already paid in £5k this tax,year? If your employer is contributing separately, that won't count, but deductions at source will. You would only need to put in the difference between £5,000.01 and what you have already paid. Yo can of course pay more to benefit you when you retire.

Also, it is advisable to sort this out slightly earlier next tax year as if the bank hold the payment etc you are cutting it fine!

Look at your payslips; it will show cumulative for tax year.

You can either increase your company pension or your personal one, but they have probably run the payroll for March already?

Your employees deduction should count towards it.

I would speak to HR and your pensions providers.

I’ve been paid for March, so have received all my income for the tax year. Alongside my work pension I have a separate private SIPP that I have been contributing to throughout the year, but want to make sure I put enough in in total.

From my payslip (not using the exact numbers but mimicking the maths):

Gross pay for this year - 115000
Pension contributions - 10000
Taxable pay - 105000

Say I’ve already put 3500 into my SIPP, am I correct in thinking I need to put in another 1500.01?

I know! I did a bit of ad hoc work which has taken me over the threshold, which I wasn’t expecting! Agree with PP that it’s a nice problem to have.

If the £3500 is the amount you paid in it will be grossed up by 25% to £4375. You need another £625 gross so only £500 net. If you paid in £2800 to get a gross £3500 in your SIPP you will need to pay in 80% of 1500 which is £1200.

Oh and you don’t need a tax return just to claim the extra tax relief, you can do it online from here. However if you do a tax return anyway then you don’t have to do both. https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments

Make sure you take into account any benefit in kind like health insurance or car payments as well.

Oh thank you, I hadn’t realised that I used the gross SIPP figure!

Thank you!

Can you make a huge purchase for work purposes that you can make as an expense? A new computer? Paying for a masters degree?

Make sure you've counted any bank interest above your tax-free allowance as well. Given that you're sticking to the higher tax rate, you have £500 allowance. At 4.5% interest, you would have made that if you've kept an average of £11k in bank accounts over the year. Anything above that gets added to your taxable income, and could push you over the £100k

(And remember that you lose the tax free interest allowance entirely if you go above £100k total income - so that's an extra £300 tax instantly if you have those savings)

Sorry, you only lose your £500 personal savings allowance if you go into the additional tax rate (ie £125,140, rather than £100k) - so you don't get the instant £300 tax at that cliff edge.

But still worth being aware that any interest above £500 will be added to your taxable income if you're avoiding the £100k cliff edge for eg childcare reasons.

(Hopefully you've avoided going over your personal savings allowance anyway, but it is a gotcha whilst we have such high inflation and interest rates!)