I am just doing my tax return for 2014/15. Like most contractors I paid myself the minimum salary of £7956.
I've just realised though that the annual limit for personal contributions to a SIPP includes the tax credit subsequently added to your contributions by the pension provider. So although I paid in 7956 I need to declare the higher amount (including tax credit) on my SA form and have therefore contributed more than the limit.
What do people think the right course of action is:
a) The self assessment online software should take care of this - its immediately obvious that i've paid more into my pension than my salary so any excess tax credit should be dealt with in HMRC's calculation
b) I should contact my SIPP provider and ask them to somehow refund the tax credit portion to HRMC that I wasn't entitled to
Government websites are rather inconsistent on this. The pension advisory service website says
"You can pay in more than these limits, but will not get tax relief on these additional contributions" and "You can pay in higher amounts than your maximum limit, but you don't receive tax relief on the excess amounts. It’s good to remember that you may have to repay any tax relief that you have received from HMRC on these excess contributions"
Whereas .gov.uk website says
"It’s up to you to make sure the tax relief you get isn’t worth more than 100% of your annual earnings"
But neither say what you're expected to do in practice.
I've just realised though that the annual limit for personal contributions to a SIPP includes the tax credit subsequently added to your contributions by the pension provider. So although I paid in 7956 I need to declare the higher amount (including tax credit) on my SA form and have therefore contributed more than the limit.
What do people think the right course of action is:
a) The self assessment online software should take care of this - its immediately obvious that i've paid more into my pension than my salary so any excess tax credit should be dealt with in HMRC's calculation
b) I should contact my SIPP provider and ask them to somehow refund the tax credit portion to HRMC that I wasn't entitled to
Government websites are rather inconsistent on this. The pension advisory service website says
"You can pay in more than these limits, but will not get tax relief on these additional contributions" and "You can pay in higher amounts than your maximum limit, but you don't receive tax relief on the excess amounts. It’s good to remember that you may have to repay any tax relief that you have received from HMRC on these excess contributions"
Whereas .gov.uk website says
"It’s up to you to make sure the tax relief you get isn’t worth more than 100% of your annual earnings"
But neither say what you're expected to do in practice.
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