SIPP and untaxed income

Hi, I'm hoping to get some advice on a question I have. I am employed on PAYE and pay into a workplace pension on my earnings of around £70,000. I also do some infrequent extra work in another job and I'm paid this income untaxed, around £3000 per year. I complete a self assessment on this income and pay 40% tax as I'm a higher rate taxpayer. I want to put the income from this second job into a SIPP but am unsure of the tax implications. As I understand it i will automatically receive extra 20% top-up on what I contribute as it is assuming I'm a basic rate taxpayer, but I haven't paid any tax on this income before I put it in the SIPP. I can also claim the extra 20% tax relief via self assessment form but again I haven't paid tax on this income. If I get the 20% from SIPP provider and and claim 20% tax relief then I'm at 140%! Is there a way I can put untaxed income in a SIPP but not get relief so I just come out at neutral? Sorry if this is confusing Many thanks, Joe

Hi
From what you are saying, you are looking to have the tax due on the self employed income to be offset by the tax relief on the SIPP payment. Unfortunaltely this cannot be done at source and both things would need to be claimed in your tax return.
The payment you make direct yourself is claimed under a different question on your tax return  as no tax relief will have already been applied.

Joe im in the exact same boat! I cant find anything about it online. Just seen your post which is exactly the same issue as me. It doesn't make sense to come out 140% as the money was never taxed when given to us. Ideally i can put into a sipp without relief as the income was never taxed. I did my self assessment to the end but not submitted and now i have a massive tax bill at the last page. I actually cant work out the maths and posted my own thread to but it needs to be verified. I think what happens is you put you freelance into Sipp and get relief automatically. You then do you tax return and they do the maths. I think you have to pay back the 20% relief amount that was given to you + NI class 2 and 4. This doesn't seem right as you are essentially gaining the 20% relief amount extra for old you and losing the 20% amount for young you.

What does this mean? 'The payment you make direct yourself is claimed under a different question on your tax return as no tax relief will have already been applied.' I cant work it out.

Hi Amy, I was very confused about this issue and couldn't really find any answers anywhere so I bit the bullet and paid for a one off tax consultation with a financial adviser. After laying out my situation I was advised that I should put my income (before tax) into the sipp, which would then be topped up by 20% automatically. I couldn't find a way or provider who wouldn't automatically add the 20%. I was then told to put the income invested plus the 20% top up (I.e. total into sipp per year) into my tax return. I was advised that HMRC would then essentially adjust my tax code to adjust for these pension contributions, taking into account the 20%. The way I understand this I won't be liable for a tax bill, my personal allowance will just be raised less than it would have been if I had already paid tax on the money. All this said, I have still not completed the tax return for 23/24 so all of this hasn't been tested yet! I'm hoping I don't get a big shock. The financial adviser seemed to think it was very straightforward. I would be interested to see if anyone else or HMRC had a take on this. I will report back when I do my tax return soon!

Hi,

You can see guidance on completing your tax return here:

How to complete your tax return for Self Assessment

Thank you.

Thanks for the update! So I did this last year for 22/23. I put everything into my sipp and i got 25% auto relief and then the amount added to adjust my 20% tax band. So less tax to pay 40% tax. Weird thing is owe ni and i seem to have a massive tax bill. I cant get my head round it. Reading else where i should have put 80% of the income i made into the sipp. it would be topped up 25% to bring it to the total i made. then i need to pay back the different in tax. Which i already have in cash ready to pay the tax man. Its hard to get a proper answer. I spoke to a few tax advisors and no of them suggusted that. I suspect if you put it all into you sipp. You will get 25% automatically, but you will owe that money back in your tax return .