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Trentham Invest
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Translating Financial Jargon Into Plain English

A Real Situation From a Well Known SIPP Provider

Dear Vikki

With regards to our conversation yesterday regarding income for the above mentioned client, I can confirm the following:

1: The clients pension year runs from 22 May - 21 May.
2: Tax year runs from 06 April - 5 April
3: Client was taking annual income in arrears and now changing to advance.

This is were the problem arises.

Due to the change in HMRC Legislation on 06/04/2013 where they introduced RTI (Real Time Information), we advanced up holiday pay until the end of the current tax year to benefit the client with his full personal allowace, hence why he received a GROSS payment (no tax) on 15/04/2013.

If we roll this payment back, we will have to issue a new payslip, as tax is now likely due on that payment. We will deduct the tax due, net from the new payment, which may also be taxed. The client can delay the payment if they wish.

Please can you let me know how the client wishes to proceed.

Kind Regards,

This is an exact extract from an email received by Trentham Invest from a well-known SIPP provider (including spelling mistakes).

Our Translation

Dear (client)

I write further to our previous communications regarding your income from the XXX SIPP.

XXX SIPP have advised the following:-


Your options are:

Option 1. Take the money now and have some tax circa £233 to pay (this will be dealt with by XXX SIPP Provider and they will issue a new set of payslips accordingly).

Option 2. Take the money next April and have no tax to pay.

Please can you confirm to me whether you wish to proceed with Option 1 or Option 2?


First Payment

£5,106 was made 15.04.2013. This represents pension plan period 22.05.2012 - 21.05.2013.
Income payment was received in tax year 13.14.

Your tax code is 944L
Your personal allowance (tax free amount) is £9,044
Payment 1 was paid with no tax deducted because £5,106 is less than £9,044

Second Payment

You would like another £5,106 soonest for pension plan period 22.05.2013 - 21.05.2014.
Income payment will be received in tax year 13.14.

Excluding all other incomes that you have the total taxable income from these two is £10,212.
According to the pension payment computer your tax free amount is £9,044
Therefore there will be circa 20% tax on the surplus over £9,044

If you chose to take the £5,106 after 6th April 2014 which would still be in the current pension plan period this would fall into next tax year and would not have tax deducted.

Kind regards and I look forward to hearing from you in due course.

Vicki Jolly
Client Services Manager

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