Contribution Declarations

Contribution Declaration

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

if contributions are paid to my Freetrade SIPP on which tax relief is sought, I declare that:

a) I am under age 75 and am a relevant UK individual (see Note 1, below).

b) The total of the contributions paid (see Note 2, below) to this Scheme and to other registered pension schemes, in respect of which I am entitled to tax relief, under section 188 of Finance Act 2004, will not exceed, in any tax year, the higher of:

  • the basic amount in that tax year (see Note 3, below); or
  • my relevant UK earnings (see Note 4, below) in that tax year.

c) The declaration in b), above, is correct, to the best of my knowledge and belief.

d) I will give notice to Freetrade if an event occurs, as a result of which I will no longer be entitled to relief on contributions, under section 188 of Finance Act 2004 for example, I cease to be a relevant UK individual (see Note 1, below). I will give this notice by the later of:

  • 5th April in the year of assessment in which the event occurs; and
  • the date which is 30 days after the occurrence of that event.

I understand and acknowledge that if I have made a successful application for Enhanced or Fixed Lifetime Allowance protection that was received by HMRC on or after 15th March 2023 this will be lost if a contribution is made to this pension plan or any other pension plan and it is my responsibility if this occurs.

I understand and acknowledge that once contributions have been received into my pension plan, they cannot generally be refunded other than where Excess Contribution Lump Sum Payment rules apply (see Note 5, below) or I cancel my pension plan within the 30 day cancellation period.

Note 1: Relevant UK individual

You are a relevant UK individual for a given tax year if you:

a) have relevant UK earnings (see Note 4, below) chargeable to income tax for that tax year; or

b) are resident in the United Kingdom at some time during that tax year; or

c) were resident in the UK at some time during the five tax years immediately before the tax year in question and were also resident in the UK when you joined the pension plan; or

d) you or your spouse have, for that tax year, general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).

If you fall within category b), c) or d) above and you do not have relevant UK earnings, the maximum member contribution is the basic amount (see Note 3, below).

Note 2: Total contributions

This means the total gross contributions that you make each tax year to all the registered pension schemes of which you are a member. In the case of contributions to a relief at source scheme such as this pension plan, it means the full contributions, that is, the net contributions plus the amount of tax relief we collect from HMRC and add to the pension plan.

Note 3: The basic amount

The basic amount is currently £3,600 (including tax relief) and has remained at that amount since 2006. It may be changed by legislation in the future.

Note 4: Relevant UK earnings

As a general rule most income that is earned and assessable for income tax in the UK counts as relevant UK earnings.

Income that generally does not count includes:

  • Pension income.
  • Dividends.
  • Most rental income.
  • The first £30,000 of a redundancy payment.
  • Income earned in the UK but not subject to UK income tax due to a double taxation agreement with another country where you are liable for tax.

Examples of earnings that count as relevant UK earnings can be found on the HMRC website here:

A summary of some types of relevant earnings is provided below:

  • Employment income such as salary, wages, bonus, overtime and commission providing it is chargeable to tax under Section 7 (2) Income Tax (Earnings and Pensions) Act 2003 (ITEPA).
  • Income derived from the carrying on or exercise of a trade, profession or vocation (whether individually or as a partner acting personally in a partnership) chargeable under Part 2 Income Tax (Trading and Other Income) Act 2005.
  • Rental income is generally not relevant earnings. Some rental income may be included if it relates to UK or EEA furnished holiday lettings under Part 3 of Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).
  • Patent income, where the individual alone or jointly devised the invention for which the patent in question is granted, but only if it falls under specific tax categories.
  • General earnings from an overseas Crown employment which are subject to tax in accordance with section 28 of ITEPA 2003.

The above is not a complete list of relevant earnings. As you must declare that your contributions in excess of the basic amount will not exceed your relevant UK earnings in any given tax year, if you are in any doubt as to whether earnings, on which you are reliant to justify the amount of contribution being paid, are relevant UK earnings, then you should seek professional advice.

Note 5: Excess Contribution Lump Sum Payment

Ordinarily, once contributions have been made into a pension plan, they cannot be refunded. However, pension rules do make allowance for the fact that individuals may end up having contributed more than the tax relief limit, for example, because they did not earn as much as they expected during a tax year. If an excess contribution happens, you are required to tell the Scheme Administrator so that it can refund to HMRC the excess tax relief that has been collected. HMRC will deal with you directly about recovering any tax relief above the basic rate that they have given you in relation to the excess contribution.

You then have a choice about your net excess contribution. You can either leave that in your pension plan or request that the Scheme Administrator refunds some or all of it to you. There are many factors to consider when deciding what is right and if you are in any doubt, you should seek professional advice.