Can I contribute to SIPP via umbrella company?

[IR35FanClub]

Just been looking in to all of this myself as I'm doing an inside IR35 gig for the 1st time. Caveat - as I under stand it so far this is not advice...

Up until now I would just lump sum a bit from the ltd every 6 months or so which is treated the same way as salary sacrifce - no tax or NI deductions are made so you can't claim any back either.

With an umbrella provided pension or a SIPP you are losing money in NI contributions... both empoyers and emplyees NI are getting deducted. You get a 20% tax rebate automatically (assuming you have set up the contributions properly). But assuming you are on 40% tax rate you claim the rest back in your tax return to get topped up to 40% relief. As per : https://www.gov.uk/tax-on-your-priva...ion-tax-relief

However you can't claim the NI back. So that's gone for ever.

I don't have a list of salary sacrifice umbrella schemes yet - but it's important to understand thast you are losing a big chunk of income to NI and going up with the social care bill if you aren't doing salary sacrifice. Employers NI has no upper limit so 13.8% on anything over £8,840 yr / £737 mth!! At least employees drops back from 12% to 2% once you get to £50,270. But that means between 10k and 50k you are losing 25% of everything to NI! (Willing to be corrected as I'm just looking up not using a calculator).

I will be swapping umbrella as mine don't do scarifice and only offers to pay into their prefferred pension provider - Smart Pension, they haven't impressed me. I asked for 20% contributions - to minimise my tax, and someone screwed up and they're only doing 10.5%. And then take too long - about 6 - 8 weeks before it gets invested in their limited choice of fund with higher charges thatn I like. Typically 0.5%ish when my funds in my HL SIPP are all under 0.1% apart from a couple of active managed funds.

I'm 49 so can get at the 25% lump sum money in 6 years time it I really needed it. But don't start drawing down income or you lose the right to keep contributing tax free - and are limited to £4,000 per year. Just watched a Youtube on this and people have royally screwed up in some cases. You get hit with up to 55% charges on later contrubtions if you start taking moeny out! (Its to stop you taking it out and putting in back in again repeatedly and getting more tax relieft as it would be like cyclical VAT fraud - you've make 5% every time you put it back in without the charge). https://youtu.be/AJuIjabQPdE

[eek]

With an umbrella provided pension or a SIPP you are losing money in NI contributions... both empoyers and emplyees NI are getting deducted. You get a 20% tax rebate automatically (assuming you have set up the contributions properly). But assuming you are on 40% tax rate you claim the rest back in your tax return to get topped up to 40% relief. As per : https://www.gov.uk/tax-on-your-priva...ion-tax-relief

However you can't claim the NI back. So that's gone for ever.

Um no - any umbrella using Salary Sacrifice should be paying pension contributions before any NI deductions are taken - that's literally the only advantage an umbrella offers over deemed payment.

Speak to Lucy at Clarity - she will explain everything.

[ASB]

Just been looking in to all of this myself as I'm doing an inside IR35 gig for the 1st time. Caveat - as I under stand it so far this is not adv

From your description it sounds as though your umbrella is simply making your personal contribution on you behalf. This would be unusual but not unique.

They could also be simply rinsing you for the NI. I would have to see a payslip to figure out.

But you right. It is important to remember the NI hit and the only way to get rid is by employer gross contributions.

Auto enrolment mandates both employer and employee contributions which gives rise to 2 simple observations
- why is it so hard for an umbrella to do salary sacrifice.
- do umbrellas properly manage opt for people who do not wish to contribute.

Regarding tax free sum it's important to note you only get one shot at it. It is then pre drawdown but can remain invested. Some providers (like my employers scheme) up their charges at this point. This means you won't get 25% of any furrher growth tax free (but that portion of contributions subsequent will effectively be a seoerate pot and will qualify).

When taking tax free this can impact any benefits (both means and non means tested). Paying down debt with the lump sum should avoid this. But it depends on the exact wording of the benefit in question.

The reduction of the MPAA only kicks in if you take flexible benefits (in most cases this would be usual).

It does not apply if all the fund at that point is used to purchase an annuity (this is quite possibly sensible if you have a policy with a GAR which is quite likely for oldies like me).

[IR35FanClub]

Um no - any umbrella using Salary Sacrifice should be paying pension contributions before any NI deductions are taken - that's literally the only advantage an umbrella offers over deemed payment.

Speak to Lucy at Clarity - she will explain everything.

I didn't make that clear - I meant if they are just offereing a regular pension without salary sacrifice. That's when you lose the NI.

[IR35FanClub]

From your description it sounds as though your umbrella is simply making your personal contribution on you behalf. This would be unusual but not unique.

They could also be simply rinsing you for the NI. I would have to see a payslip to figure out.

I've been through the payslips, What they are doing is taking off their agency fee, holiday fund deduction, apprenticeship levy and employers NI, leaving me with a itermediate "Salary" used for the pension, tax and NI calculation. But they aren't doing the right thing with the pension as it's the same contribution every week, regardles of how many days I worked. So it's not being done as a % of earnings That's another reason I'm looking to move. I asked them to do 20% and it's roughly 10.5% if you average over the year.

They also didn't check with me why my tax code was only 345, not 1247 or whatever it is now! Turns out my accountants for LTD hadn't shut down my payroll . It was only when I went to HMRC online I spotted they were still submitting RTI returns. Despite me telling them I'm moving to Umbrella - Doh! Still it was a nice suprise to get £2000 back from HRMC as a tax rebate now it's sorted! First time I've had money come the other way Bizarely the lady on the phone at HMRC was very efficient and understood what had happened and what I wanted to do. My lucky week! Today I'll finally get to see what my take home is.

[ASB]

To be fair to brolly they will have applied the tax code they were provided as they are required to.

That will have come from a P45 (which seems you will not have provided) or via requesting a code from HMRC.

I suppose they could have asked "why no P45".

I, and many others I think, would not be happy about an employer wanting to know why my tax code was at a specific level. It can be a sensitive area.

Your Tax code should have been on the payslip and you should have been provided with a "full" copy either by post or by email. You should have had the opportunity to proactively deal with it - at least that is the theory.

[eek]

I didn't make that clear - I meant if they are just offereing a regular pension without salary sacrifice. That's when you lose the NI.

Also wrong - or they are pocketing a few quid

[Grah]

I'm with Nasa and looking to contribute/do salary sacrifice into a SIPP but they (Nasa) want to charge me £20 a month for the privilege because of their software blah. Is this normal or am I being (even more) fleeced (than normal)?

[eek]

I'm with Nasa and looking to contribute/do salary sacrifice into a SIPP but they (Nasa) want to charge me £20 a month for the privilege because of their software blah. Is this normal or am I being (even more) fleeced (than normal)?

£20 to put £x00 extra into your pension? It’s not ideal but it is a very manual process and it depends on their overall rate / margin. Clarity includes it in their £95 a month but I don’t know what NASA’s typical rate is.

[Grah]

Thanks Eek. Funnily enough I'm paying £75 so adding this in gives the same fee as Clarity, which I tried to join but the agency wouldn't accept. Preferred list etc. You know the drill.

Cheers,
Grah