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SIPP - Is this against the tax rules

Toneekc
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Joined: December 22nd, 2020, 7:28 pm

SIPP - Is this against the tax rules

#374314

Postby Toneekc » January 7th, 2021, 1:16 pm

Hi Everyone

My wife has a SIPP. If she activates her pension by taking her 25%, Tax Free, lump sum, she can't pay this back into her pot as a private contribution and get Tax Relief again, that is against the rules.

However, if she gives the money away to some body (ok, it's me) and I pay it into my SIPP, thus becoming a private contribution which qualify's for Tax Relief.

Is that correct or am I heading for nick ?

Thanks in advance.

Tony

Moderator Message:
Moved to a more suitable forum, where more answers might be forthcoming. --MDW1954

jonesa1
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Re: SIPP - Is this against the tax rules

#374384

Postby jonesa1 » January 7th, 2021, 4:04 pm

My understanding is that you can contribute up to 100% of your earnings up to £40k pa (less if you earn a lot) to a pension (includes any employer contributions) and qualify for tax relief. Providing you don't exceed the limits, I don't believe HMRC care where the money actually comes from (you could argue that it's earned income being invested that has been saved by living off your wife's pension money. If you don't have any earnings, then the limit is £2880 (which gets uplifted by HMRC by £720)

mc2fool
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Re: SIPP - Is this against the tax rules

#374395

Postby mc2fool » January 7th, 2021, 4:37 pm

jonesa1 wrote:I don't believe HMRC care where the money actually comes from...

Yes they (potentially) do.

"Recycling of a pension commencement lump sum involves using that lump sum as the means to increase contributions significantly to a registered pension scheme. The recycling rule is intended to prevent the systematic exploitation of the tax rules for registered pension schemes to generate artificially high amounts of tax relief by using the pension commencement lump sum to make a further, tax relieved, contribution to a registered pension scheme."

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133800 (Overview section)

Tony: I have no idea as to the answer to your question and the above linked-to tax manual looks just too horrendous on a quick glance, so I'll leave reading it to you. :D

mc2fool
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Re: SIPP - Is this against the tax rules

#374404

Postby mc2fool » January 7th, 2021, 4:44 pm

Toneekc wrote:However, if she gives the money away to some body (ok, it's me) and I pay it into my SIPP, thus becoming a private contribution which qualify's for Tax Relief.

Aha, here you go, easier than digging through that manual....

"An individual may use their PCLS to pay a pension contribution on behalf of another, eg spouse, civil partner, child etc and this cannot be considered PCLS recycling. It needs to be the same individual, who receives the PCLS and benefits from the new pension contribution, for PCLS recycling to be a possibility. "

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pensions-recycling/

Toneekc
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Joined: December 22nd, 2020, 7:28 pm

Re: SIPP - Is this against the tax rules

#374677

Postby Toneekc » January 8th, 2021, 11:08 am

Thanks to mc2fool and jonesa1

You help me make my decision.

There is one bit of info I did fined out that my be of interest.
If you've not use your yearly SIPP allowance of £40,000 you can go back three years to claim.

Thanks to both again and a happy new year.

TC

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Re: SIPP - Is this against the tax rules

#374680

Postby swill453 » January 8th, 2021, 11:13 am

Toneekc wrote:Thanks to mc2fool and jonesa1

You help me make my decision.

There is one bit of info I did fined out that my be of interest.
If you've not use your yearly SIPP allowance of £40,000 you can go back three years to claim.

Only if you have enough earnings this year to cover it.

Scott.


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