SIPP Exemption

[Efcooper71]

Hello, hopefully this is under the right heading ..... I am a sole trader. I make a monthly contribution to a SIPP which I receive 20% tax relief on at the end of the year. My question is when I submit my self assessment at the end of the year am I exempt from paying tax on the monies I have put into the SIPP in the same way as I am for say mileage, or do I declare it as I must pay tax on it.

I hope that makes sense, kind regards

Eddy.

[robbob]

Hello Eddy
Thats a nice confusing question you have there.


Basically when you are a sole trader any payments made to your sipp are not allowable expenses of the sole trader trade.
Therefore if these payments are going through your sole trader bank account they should be posted to drawings.
if they are paid privately that's hunky dory as they are not business expenses as such.

(as an aside - Practicably speaking You pay tax before you make these payments then you get that same tax back when hmrc add to your pot - this explains why payments are not allowable when you are still getting the tax benefit overall)


So you most definately do not claim these payments as you would do for mileage.

A couple of things to remember.

Ensure you indocate on your sipp topups that you are eligible for the 20% tax rleief that is automatically added in by hmrc, this extra being 25% of your net payments made should periodically be added to the sipp. The fact that you mention the 205 sounds like you are in te clear here.

Note you should enter the grossed up level of payments (or netted down if it specifically asks for that figure onj the return) made into your sipp on the relevant tax return page - note thats not the self employment pages !! - this will ensure that if you do reach higher rate tax with your sole trader profits you will receive the relevant higher rate relief.

[Efcooper71]

Dear Sir, thank you for taking the time answer my query, it is much appreciated. KR Eddy.