Discussion
So i had a hypothetical question on SIPPs.... they dont make this very straight forward!
Lets assume we have a £10k annual pension investment limit and one is an additional rate tax payer. Lets say an employer has contributed £5k to a company pension (presumably this is after all the tax uplifts- i.e. i dont claim a tax rebate for the company pension bit).
My question stems mainly around the impact of tax and how much that limits how much one can still invest in the personal pension in this financial year. Is it simply £10k - £5k i.e. £5k. That gets uplifted by 20% by the SIPP provider (i.e. £5k becomes £6k), and then one claims the rest of the marginal tax in ones tax return i.e. £1.25k so in effect the £5k SIPP contribution "buys" you £7.25k inside the SIPP.
Am I understanding that right?
Lets assume we have a £10k annual pension investment limit and one is an additional rate tax payer. Lets say an employer has contributed £5k to a company pension (presumably this is after all the tax uplifts- i.e. i dont claim a tax rebate for the company pension bit).
My question stems mainly around the impact of tax and how much that limits how much one can still invest in the personal pension in this financial year. Is it simply £10k - £5k i.e. £5k. That gets uplifted by 20% by the SIPP provider (i.e. £5k becomes £6k), and then one claims the rest of the marginal tax in ones tax return i.e. £1.25k so in effect the £5k SIPP contribution "buys" you £7.25k inside the SIPP.
Am I understanding that right?
R33FAL said:
So i had a hypothetical question on SIPPs.... they dont make this very straight forward!
Lets assume we have a £10k annual pension investment limit and one is an additional rate tax payer. Lets say an employer has contributed £5k to a company pension (presumably this is after all the tax uplifts- i.e. i dont claim a tax rebate for the company pension bit).
My question stems mainly around the impact of tax and how much that limits how much one can still invest in the personal pension in this financial year. Is it simply £10k - £5k i.e. £5k. That gets uplifted by 20% by the SIPP provider (i.e. £5k becomes £6k), and then one claims the rest of the marginal tax in ones tax return i.e. £1.25k so in effect the £5k SIPP contribution "buys" you £7.25k inside the SIPP.
Am I understanding that right?
Nearly!Lets assume we have a £10k annual pension investment limit and one is an additional rate tax payer. Lets say an employer has contributed £5k to a company pension (presumably this is after all the tax uplifts- i.e. i dont claim a tax rebate for the company pension bit).
My question stems mainly around the impact of tax and how much that limits how much one can still invest in the personal pension in this financial year. Is it simply £10k - £5k i.e. £5k. That gets uplifted by 20% by the SIPP provider (i.e. £5k becomes £6k), and then one claims the rest of the marginal tax in ones tax return i.e. £1.25k so in effect the £5k SIPP contribution "buys" you £7.25k inside the SIPP.
Am I understanding that right?
After the £5k gross company contribution you have £5 personal allowance remaining. To use all of this you would make a net SIPP contribution of £4k and your SIPP provider will claim back the basic rate of tax bringing this up to the remaining £5k of available allowance.
You then claim the addition higher rate of tax from this contribution back on your tax return.
I hope that helps.
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