Paying into SIPP - contributions must be eligible for UK pension relief?

Hi - in the “Contribution Declarations” setting out the rules - there is the phrase:

“I understand that contributions which are not eligible for UK pension relief at source tax relief cannot be paid into this pension plan.”

…so - only contributions that are eligible for tax relief are allowed.

if I organise contributions before tax (as is normal I feel) - then surely they are not “eligible for tax relief” as they were paid before I paid tax?

also - would this mean no contributions above the 40K limit?

Can anyone clarify -

Note that I have sought some clarification with Freetrade directly, but wanted some community opinion too.

thanks very much,

The contributions I make to my SIPP come from my bank account.
HMRC have already taxed that money, so they automatically credit my Freetrade SIPP with the 20% relief.
If I were a higher rate tax payer, I could then write off to HMRC to claim additional relief.

Freetrade do not currently support employer contributions, which is where I assume the employer would talk to HMRC and sort out the contribution before applying tax to your pay.
Those contributions would obviously not be eligible for relief.

I believe you are correct about the 40K annual allowance, this applies to the total across all pensions you may have.

I’m not a tax or financial advisor though, just a rando on a forum.

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thanks Jubatus - your way means (as you clearly seem to understand) work in the form of a tax return to claim back anything more than the basic rate tax - doable, but a pain. Also awkward if you want to go near the 40K limit I think as you’d have to be confident of getting the sums right and not going over that limit.

The bit I’m not clear on is whether “employee” not “employer” contributions are allowed (i.e. contributions before tax has been paid, but the employee part of it not the employer part).

In the case of employee contributions, you would need to check first with your employer.


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Do you mean like a workplace pension scheme where you contribute a percentage of your earnings pre-tax and your employer chucks in a bit too?
That’s not how the SIPP works, any contributions are made by you transferring funds from your bank account, i.e. after tax. Or transferring in from another pension.

Do you mean like a workplace pension scheme where you contribute a percentage of your earnings pre-tax and your employer chucks in a bit too?

yes - I’m I was hoping the employee part would still be allowed - otherwise gotta do a tax return every year and figure out how to claim back the tax :frowning:

in the longer term I was hoping that my employer might actually be me (through a limited company as a contractor) - in which case was hoping to pay 40K directly in to the SIPP - but looks like that’s a pipe dream.

I’m contributing to a workplace pension and have the Freetrade SIPP as well, mainly because I’ve maxed out the employer contributions and I want to see how well I invest in comparison.
I’m currently a basic rate tax payer so the automatic relief works well for me, but I’ve been promised a promotion next year that might push me up into the higher rate; I’ll have to look closer at tax returns and self assessment.

Good luck with the contracting, I know I’d not have the patience for all the paperwork & organization required!