SIPPs and tax relief.

[expat]

I know some people here are actively using the fact that this is a huge legit IR35-safe tax break. I want to ask for a couple of predictions:

1. Will the next Budget remove Higher Rate Tax Relief for individual contributions to a SIPP?

2. Will a similar hit be applied to Company contributions too?

My guesses are:
1. Yes.
2. Not yet. They'll spot it later and come back in the Autumn for that.

[DimPrawn]

Yes. It's not "fair" that those who are "rich" (i.e. earn over £30K) can get "free money" to put in their "greedy" pension pots.

HTH

Your pension all belong to us.

[pmeswani]

I know some people here are actively using the fact that this is a huge legit IR35-safe tax break. I want to ask for a couple of predictions:

1. Will the next Budget remove Higher Rate Tax Relief for individual contributions to a SIPP?

2. Will a similar hit be applied to Company contributions too?

My guesses are:
1. Yes.
2. Not yet. They'll spot it later and come back in the Autumn for that.

I haven't heard anything about it yet, so the answer is I don't know. I do know that if you don't use your allowance allocated for this year, then it can't be carried over to next year. However, I've not heard anything from Hargreaves Lansdown about losing the Higher Rate Tax Relief for either individuals or corporate. I believe that corporate contributions don't attract any rebate, it's paid in as a gross amount. The only saving, as you already know, is the Corporation Tax.

[pmeswani]

Yes. It's not "fair" that those who are "rich" (i.e. earn over £30K) can get "free money" to put in their "greedy" pension pots.

HTH

Your pension all belong to us.

Why am I thinking of Prawn Sandwiches right now?

[rootsnall]

If you are talking about paying big chunks of gross Ltd income into a SIPP then it is not truly IR35 proof as the wording is something like 'at the discretion of your local tax inspector'. In other words they could claw back the payments later and tax you on them !?!

I've been sticking to the rule of only paying in at the level of your salary which has 'apparently' been given the unofficial nod as being OK.

[ace00]

......
I've been sticking to the rule of only paying in at the level of your salary which has 'apparently' been given the unofficial nod as being OK.

I don't think there's any question that you can pay 100% of your salary into a SIPP. But I guess it would be even safer to deduct reasonable living expenses from that.

[rootsnall]

I don't think there's any question that you can pay 100% of your salary into a SIPP. But I guess it would be even safer to deduct reasonable living expenses from that.

You aren't really paying 100% of your salary. If your salary is say 10K and that is paid out as a wage with NI deducted then the 'unofficial rule' is you can make a direct gross payment of 10K from your Ltd into a SIPP and no questions will be asked.

I would make much bigger payments if I knew I'd get away with it, infact I'd pay the whole lot into a SIPP and pay no tax or NI but I think this would get the taxman excited.

[moorfield]

I know some people here are actively using the fact that this is a huge legit IR35-safe tax break. I want to ask for a couple of predictions:

1. Will the next Budget remove Higher Rate Tax Relief for individual contributions to a SIPP?

2. Will a similar hit be applied to Company contributions too?

I think both are unlikely - too obvious a tax grab. A future goverment is more likely to tinker with the lifetime allowances, 25% lump sum limit, age related tax bands and actuarial/annuity tables to squeeze some more pips out of its pensioners.

[expat]

I think both are unlikely - too obvious a tax grab. A future goverment is more likely to tinker with the lifetime allowances, 25% lump sum limit, age related tax bands and actuarial/annuity tables to squeeze some more pips out of its pensioners.

I don't agree about loss of HRT relief being unlikely. ISTM that loss of HRT relief is a 100%-er medium term, many politicians (e.g. Vince Cable) are already talking about how it is "unfair" that higher earners get higher tax relief on their pensions too.

If you run a Ltd Co then obviously that's easily sidestepped by having the Ltd Co make company contributions, which are paid in gross of PAYE and indeed NICs. So I would expect that "loophole" to be picked up sooner or later.

I do agree about the 25% lump sum, at least for those still in work. I can't help but notice that it is no longer called "tax-free lump sum", but " pension commencement lump sum". They will do something with that, whether it is to remove it, to force it into an annuity, or at least to allow it only to those who "really" retire, i.e. don't work any more.

This is not impossible: in some countries (e.g. France that I know about) you either have a status of "Retired" or you do not: if you are Retired you can't work, and if you are not Retired then you can't get the tax breaks yet.

[Cyberman]

Pensions are taxed when they are paid out from age 55 onwards when you draw them. Thus there is no logic in taxing the contributions, so I see this as pure scaremongering.

However, if you were paying in millions in order to avoid tax then maybe HMG would act there, but this will not affect any of us I would guess !!