Self-Invested Personal Pensions (SIPPs) are an excellent way to save for your retirement while benefiting from tax relief.

Understanding the different allowances and rules surrounding SIPPs is vital to maximise your pension savings.

In this comprehensive guide, we’ll cover everything you need to know about SIPP allowances, from the 2023-2024 annual allowance, how to claim the additional rate tax relief from HMRC (it’s not automatic), to specific rules for non-earners, employer contributions, and limited companies.

What is the SIPP allowance for 2023 to 2024?

For the 2024-2025 tax year, the annual allowance for SIPPs is £60,000.

So, whichever is lower between your annual income and £60,000 is the maximum amount you can contribute into your SIPP during the tax year and still receive tax relief on those contributions.

Keep in mind that this allowance applies to the total contributions made across all your pension schemes, not just your SIPP.

Tax relief on SIPP contributions

When you contribute to a SIPP, the government provides tax relief on your contributions, effectively giving you a “bonus” based on your marginal income tax rate.

Here’s a breakdown of tax relief by tax bracket:

  • Basic rate taxpayers (20%): For every £80 you contribute, the government adds £20 in tax relief.
  • Higher rate taxpayers (40%): For every £60 you contribute, the government adds £40 in tax relief.
  • Additional rate taxpayers (45%): For every £55 you contribute, the government adds £45 in tax relief.

If you’re a higher or additional rate taxpayer, you need to claim the extra tax relief (above the default 20%) on your Self Assessment tax return.

If you’re a basic rate tax payer, you’ll automatically get the added 20% from your SIPP provider as they’ll claim it from HMRC on your behalf.

Here’s a quick table with a reminder of the income tax rates in the UK:

BandTaxable Income (£)Tax Rate
Personal AllowanceUp to 12,5700%
Basic Rate12,571 – 50,27020%
Higher Rate50,271 – 125,14040%
Additional RateOver 125,14045%

How to calculate your SIPP allowance

Calculating your SIPP allowance involves considering your relevant earnings, the annual allowance, and any contributions you’ve already made during the tax year.

Here’s a step-by-step guide:

  • Work out your earnings for the tax year.
  • Whichever is lower between your income and the annual allowance (for 2023 to 2024, it’s £60,000) is your maximum amount.
  • Check what you’ve already paid into to pensions (eg., are you contributing to a workplace pension? This includes your employer’s contributions).
  • Subtract any pension contributions you’ve already made during the tax year.
  • The amount left over is your remaining balance, and you can choose to top up your SIPP with the difference and claim tax relief.

Keep in mind, if you’ve already accessed your pension then you’ll need to factor in the MPAA (Money Purchase Annual Allowance) which is £10,000. More on this later.

SIPP allowance for non-earners

If you’re not earning any income at all, you can still contribute £2,880 to a SIPP and get £720 tax relief (20% of your gross contribution of £3,600) to bring your total up to £3,600.

Many people don’t realise this and it’s a great way to effectively get a guaranteed return on your savings if you’re a non taxpayer – just remember you may need to pay tax on it when you take it out (after your 25% tax free cash).

Money Purchase Annual Allowance (MPAA)

The MPAA is a lower annual allowance that applies if you’ve already accessed any of your pension pots flexibly.

As of April 2024, the MPAA is £10,000.

This limit applies to all your money purchase pension schemes (like SIPPs), but it doesn’t affect your defined benefit pension schemes.

When does the MPAA apply?

It’s important to note that taking tax-free cash, buying an annuity, or reaching age 75 doesn’t trigger the MPAA.

But if you start a flexi-access drawdown and take income from your pension, this will trigger it and you can only contribute £10,000 to a SIPP.

What happens if I put more than £60k in my SIPP?

If you contribute more than the £60,000 annual allowance into your SIPP or more than your annual allowance based on your salary, you’ll face a tax charge.

This is known as the Annual Allowance Charge, and it’s designed to recoup the tax relief you earned on the excess contributions. It’s calculated using your marginal income tax rate and applied to your excess contributions.

What is the SIPP lifetime allowance?

The SIPP lifetime allowance has now been removed as of April 2023.

Prior to this, the SIPP lifetime allowance was a limit on the total value of pension benefits you can receive from all your pension schemes, including SIPPs, without facing a tax charge.

Before April 2023, the lifetime allowance was £1,073,100. If you exceeded this limit, you’d face a tax charge known as the Lifetime Allowance Charge, which could have been as high as 55% on the excess amount.

Making up for previous years’ SIPP allowances

If you haven’t used your full SIPP allowance in the previous three tax years, you can carry forward any unused allowance. However, you’ll need to have been a member of a pension scheme during those years, even if you didn’t contribute.


Let’s say you had £10,000 of unused allowance from 2020-2021, £5,000 from 2021-2022, and £15,000 from 2022-2023. You could carry forward a total of £30,000 in unused allowance to the 2023-2024 tax year, on top of your £60,000 allowance for that year.

Remember, prior to April 2023 the annual allowance was £40,000, so you’ll need to factor this into your calculations.

SIPP contribution rules

There are the key rules to keep in mind when making SIPP contributions:

  • The annual allowance applies across all your pension schemes, not just your SIPP.
  • The MPAA of £10,000 applies if you’ve accessed any of your pension pots flexibly.
  • Tax relief on contributions is limited to your relevant earnings or the annual allowance, whichever is lower.
  • Contributions above the annual allowance will be subject to an Annual Allowance Charge.

Employer SIPP allowances

Employers can also contribute to your SIPP, and these contributions also count towards your annual allowance.

However, employer contributions can provide additional tax benefits, as they’re not subject to National Insurance contributions or income tax.

Employer contributions can also help you maximise your pension savings, especially if your employer offers a matching contribution scheme.

Limited company SIPP allowances

If you run a limited company, you can make employer pension contributions on behalf of the company’s directors and employees.

These contributions are considered allowable business expenses and can reduce your company’s Corporation Tax bill.

The same £60,000 annual allowance applies to limited company contributions, so they can be combined with personal contributions up to £60,000 to maximise tax-efficient pension savings.

The bottom line

Understanding your SIPP allowances is crucial to make the most of your pension savings and benefit from tax relief. Keep in mind the £60,000 annual allowance for the 2024-2025 tax year and the £10,000 MPAA if applicable to you.

Don’t forget that non-earners, employers, and limited companies also have allowances and rules to consider. By staying informed and planning your contributions accordingly, you can build a robust retirement fund and secure your financial future.


Can I contribute to a SIPP on behalf of my spouse or child?

Yes, you can make contributions to a SIPP on behalf of your spouse or child. The same £3,600 annual allowance for non-earners applies to these contributions, even if your spouse or child has no relevant earnings.

Can I transfer other pensions into my SIPP?

In most cases, you can transfer other pension schemes, like personal pensions or workplace pensions, into your SIPP. Transferring pensions can help you consolidate your pension savings and simplify your retirement planning. However, it’s essential to carefully consider the benefits and potential drawbacks of transferring, as some pension schemes may have valuable guarantees or benefits that you could lose by transferring.

Are there any restrictions on SIPP investments?

SIPPs offer a wide range of investment options, like stocks, bonds, funds, and commercial property. However, there are some restrictions on the investments you can hold in your SIPP. For example, you cannot invest directly in residential property or certain types of tangible assets, like fine art or vintage cars.

Can I access my SIPP before retirement?

You can typically access your SIPP once you reach the age of 55. When you decide to access your pension, you have several options, such as taking a tax-free lump sum, entering drawdown, or purchasing an annuity. It’s crucial to carefully consider your options and seek professional financial advice to ensure you make the best decisions for your retirement.

There are some exceptions where you can take your pension earlier, like if you’re suffering from a terminal illness.

What happens to my SIPP if I die?

If you die before accessing your SIPP, the remaining pension funds can usually be passed on to your chosen beneficiaries, such as your spouse, children, or other individuals. The funds can be passed on as a lump sum, a drawdown pension, or an annuity. The tax treatment of inherited pension funds depends on your age at death and the way your beneficiaries choose to access the funds.