AJ Bell pensions expert Tom Selby explains the rules
Thursday 30 Jul 2020 Author: Tom Selby

I previously worked for the NHS and decided a couple of years ago to leave and take my NHS pension at age 60. I then took on a role with a university.

Over the last few years, I have been making SIPP contributions and used up most of my previous years’ carry forward allowances to claim tax relief at the higher rate through writing direct to HMRC.

In tax year 2019/2020, my total income puts me in the higher bracket (41% Scotland), I have already made a contribution to my SIPP for that year which was less than my earned income (£23,000), and received basic-rate tax relief.

As a higher-rate tax payer am I eligible to write to HMRC and claim the additional tax relief at the higher rate?


Tom Selby AJ Bell Senior Analyst says:

For most people the amount they can save each year in a pension is limited to the lower of 100% of ‘relevant UK earnings’ and £40,000.

When you contribute to a SIPP, your provider will top up the money you pay in automatically via basic-rate tax relief.

This means that, provided your relevant UK earnings are £40,000 or more for the tax year, you can contribute up to £32,000 into a SIPP and this will be topped up by a maximum of £8,000 in basic-rate tax relief.

Relevant UK earnings only includes certain sources of taxable income like salary, bonuses and commissions. They do not include earnings from buy-to-let property or pension income.

Whether you’re eligible for additional-rate or higher-rate tax relief, however, is based on your highest marginal rate of income tax, which will be based on all sources of taxable income.

It doesn’t matter whether or not your relevant UK earnings on their own were within the higher-rate tax band. It’s the overall picture that’s important.

Carry forward

You mention using carry forward previously to ‘claim tax relief at the higher rate’, so it’s probably worth clarifying how this works.

Carry forward allows you to utilise unused annual allowances from the last three tax years in the current tax year.

This means, in theory, you could boost the amount you save into a pension in the 2020/21 tax year to £160,000 (3 x £40,000 allowances from the last three tax years plus 1 x £40,000 allowance in the current tax year).

The amount you can contribute remains restricted to 100% of your relevant UK earnings, however, and you would reclaim any higher or additional-rate tax relief owed in the same way as before.


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Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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