HMRC has clarified its rules around pensions. A taxpayer contacted the group as they had a specific query about paying into their SIPP (Self-invested personal pension).

They had a question about transferring shares from an employee share incentive plan (SIP) into a SIPP, as they had been made redundant from their job. They asked: “Does the transfer of £30,000 shares from a SIP to a SIPP following redundancy count towards my annual earnings limit?”

HMRC responded initially to state: “Any input into a pension would count towards your annual limit.” The maximum you can pay into your pension for the current tax year is £60,000.

The annual allowance has been set at this rate since the 2023/2024 tax year, when it increased from the previous £40,000. The taxpayer asked a further question: “Thanks however which limit? The £60,000 we are all allowed in any year or our allowable earnings for the year.

“The act as interpreted by Pension Wise states that it only relates to the £60,000 limit, not your taxable earnings for the year.” HMRC responded to confirm the amount they were paying in would be deducted from their £60,000 yearly allowance.

The person then asked HMRC if this would imply that if they had earned £30,000 in 2025 and had paid £30,000 into their pension, they could still pay in the £30,000 from their shares, all within the £60,000 allowance.

HMRC said in response: “It counts towards your annual allowance (currently £60,000 for most people) and also counts towards the 100 percent of relevant UK earnings limit for tax relief purposes.” The tax department also sent the person a link to more information about Share Incentive Plans (SIP).

The guidance states that if you get shares through a SIP and keep them in the plan for five years, you will not have to pay income tax or National Insurance on their value. You also may be able to avoid paying capital gains tax when you sell the shares.

You will not have to pay capital gains tax if:

You sell the shares, if they were kept in the plan until the point of saleThe shares are transferred to an ISA within 90 days of taking them out of the planThe shares are transferred to a pension, directly from the scheme when it ends.