SIPP tax relief question

[troika]

To confirm my understanding of the rules, eg:

Salary £10K
Rental income (profit) £10K
SIPP contribution £10K
Overall tax bill = zero?

Ie you can pay 100% of salary (upto £60K) into SIPP, not rental income, but this is allowable against the personal allowance.

[Mr Pointy]

Isn't it more like:

Taxible Income = £20,000 - £12750 Personal Allowance
Tax @ 20% = £1450
Pay £8333 into pension, HMRC adds £1666

[Eric Mc]

Mr Pointy said:

Isn't it more like:

Taxible Income = £20,000 - £12750 Personal Allowance
Tax @ 20% = £1450
Pay £8333 into pension, HMRC adds £1666

Yep.

For basic rate taxpayers, the pension fund gets your tax relief, not you personally.

If you are a higher rate taxpayer - the additional relief available at the higher rate will help reduce your tax bill.

[troika]

Yep, thanks guys. Think I’m correct that rental income is not allowable for pension tax relief, only salary?

[Mr Pointy]

troika said:

Yep, thanks guys. Think I’m correct that rental income is not allowable for pension tax relief, only salary?

Correct. It's basically earned income so nothing like rent or interest, dividends etc.

[Sheepshanks]

Mr Pointy said:

Correct. It's basically earned income so nothing like rent or interest, dividends etc.

...although - if you do not have any earnings in a tax year, you can still contribute a maximum of £3,600 (£2,880 in personal contributions and £720 basic rate tax relief).