Making contributions to your SIPP
Everything you need to know about SIPP contribution limits and rules.
How much can I pay into a SIPP?
You can pay up to 100% of your earnings into your SIPP (subject to a maximum of the current Annual Allowance of £40,000 gross) and receive Tax Relief up to that level.
Pension tax relief is given at a rate of 20% (higher rate taxpayers can claim higher levels of tax relief via self-assessment).
Your employer can make contributions to your SIPP, as well as or instead of a workplace pension. These contributions count towards your annual allowance, but are not limited by your income.
If you do not have any earnings in the tax year, you can still contribute up to £3,600 gross into your SIPP. If you have begun to drawdown income from your SIPP, you can contribute up to £4,000 gross per tax year.
What happens if I have an income of more than £240,000?
Individuals with high incomes may have a tapered annual allowance. You are counted as a high income individual if you have a "threshold income" of more than £200,000 for the tax year, or an "adjusted income" of more than £240,000. Your threshold income is your annual income before tax, less any personal pension contributions and ignoring any employer contribution. If your threshold income is more than £200,000, you will need to check your adjusted income.
Your adjusted income is worked out by taking all income that you are taxed on - including dividends, savings interest and rental income, before tax - plus the value of your own and any employer pension contributions.
Your annual allowance will reduce by £1 for every £2 that your "adjusted income" exceeds £240,000. The maximum reduction is £36,000 which reduces the annual allowance to £4,000 but only once your adjusted income reaches £312,000.
|Annual Income||Annual Contribution Allowance|
|Up to £240,000||£40,000|
Carry forward rule
You may be allowed to exceed your annual allowance of £40,000 and still receive tax relief if you have not used your full SIPP allowance in any of the past three years. To carry forward, you must have:
- Been a member of a pension scheme in each tax year from which you carry forward.
- Used your full annual allowance in the current tax year.
- Contributed less than £40,000 in one or more of the last three tax years (including personal and employer contributions).
- Earned at least the amount you are contributing in that tax year, if you are making personal SIPP contributions.
SIPP minimum contribution amount
There is no minimum contribution for your SIPP. You can easily make contributions via your online account using your debit card. To make a personal contribution via bank transfer or arrange contributions from your employer or another person, simply complete an ii SIPP contribution form. Any unused allowance may be carried forward for up to three years, if other conditions are met.
Can I contribute to a pension if I am not earning?
If you do not have any earnings in the tax year, you can still make SIPP contributions of up to £2,880 and receive tax relief of up to £720, giving you a total of £3,600 gross. If you have begun to drawdown income from your SIPP, you can contribute up to £4,000 gross per tax year.
Can my employer contribute to my SIPP?
Your employer can contribute to your SIPP, alongside or instead of a workplace pension. Contributions can be made regularly, or as a lump sum. If your employer pays a chunk of your salary directly into your SIPP, you may benefit, as you will not have to pay National Insurance on that sum. Employer contributions count towards your annual allowance but are not limited by your earnings. To arrange contributions from your employer, simply complete an ii SIPP contribution form.
Can I contribute more than my allowance?
If you contribute more than your allowance, you will not receive any tax relief, and may also be subject to an annual allowance charge, which will be added to the rest of your taxable income for the tax year. The only time you can contribute more than your SIPP contribution limit is if you qualify for "carry forward".
Can I still pay into a SIPP if I have already accessed my pension?
If you have accessed your SIPP and only taken your tax-free lump sum, you are still able to pay in up to 100% of your earnings into your SIPP (subject to a maximum of the current Annual Allowance of £40,000 gross) and receive Tax Relief up to that level. Alternatively, if you are taking taxable income from your pension, you can still contribute up to £4,000 gross per tax year. All SIPP contributions will be tested against your lifetime allowance.
What is the most I can add to a SIPP?
You can receive tax relief on contributions equivalent to 100% of your gross annual salary (capped at £40,000 per year).
In effect this means you can contribute up to £32,000 of your own money, with the remaining £8,000 topped up by the government.
Until what age can I contribute to my SIPP?
You can continue to receive tax relief on your SIPP contributions until you reach the age of 75. After that, you can still contribute but will no longer receive the benefits of tax relief.
If you do not start withdrawing a regular income, you can continue to contribute up to £40,000 annually to your SIPP until you turn 75.
After you have started income drawdown, your annual allowance for contributions is £4,000. You can choose to start income drawdown at any time after reaching the age of 55.
Can I still contribute after taking pension benefits?
If you only take your tax-free lump sum and do not start withdrawing a regular income, you can continue to contribute up to 100% of your gross annual salary (capped at £40,000 per year).
After you have started to take a taxable income from your flexi-access drawdown, your annual allowance for contributions is reduced to £4,000 (effectively meaning you can pay £3,200 personally and still receive £800 tax relief from the government). You can choose to take your tax free lump sum or commence income drawdown or both once you reach age 55.
What happens if I exceed my annual allowance?
You will not receive tax relief on contributions above the annual allowance. You may also be subject to an annual allowance charge and you will need to declare this when completing and submitting your self-assessment tax return to HMRC.
However, you may be able to contribute more than your allowance if you qualify for 'carry forward'.
What does 'carry forward' mean?
“Carry forward” is effectively used where an individual has the ability to utilise any unused SIPP annual allowance’s from the previous three years. If you qualify, you can potentially receive tax relief on contributions over £40,000.
In order to qualify, you must have:
- Been a member of a pension scheme in each year you are carrying forward allowance from.
- Used your full £40,000 allowance in the current year.
- Contributed less than your allowance in at least one of the last three tax years.
- Earned at least as much as the total you are contributing in the current tax year.
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