Client expects to have employment income of around £90k in 2021-22. He intends to make contributions into a SIPP and wishes to maximise the potential tax relief.
He has been a member of a registered pension scheme in previous tax years, but no contributions made.
I think his maximum potential contributions in 2021-22 = £40k allowance from 2021-22; £40k unused allowances from each of 2018-19, 2019-20 and 2020-21. However, maximum tax relief will be capped at his level of income in 2021-22, so there is no point him contributing any more than his total income in 2021-22, i.e. £90k (or should this be £77,430, i.e. less the value of the personal allowance on which no tax relief will be obtained as none was paid?)
- Client thinks he should be entitled to tax relief based on the higher rate tax that he paid in the previous tax years, but I don't believe this is the case - i.e. the tax relief is only available in the year the contribution is actually made (2021-22) using a maximum contribution based on brought forward unused annual allowances and total income for 2021-22.
Just wanted to check that my understanding was correct.