Pay into SIPP> Reduce tax band ?

C_Mababejive

Can anyone explain to someone who has little knowledge of the system and SA how this works?

For example, someones total gross income is say, 65k including PAYE income ,investment income etc etc

They pay X amount into a SIPP ( how is that amount calculated?)

Presumably this reduces their tax bill and can shift them from the higher rate to the basic rate bands ??

How is this handled in Self Assessment? Is there a box for SIPP contributions ?

Thanks

Dazed_and_confused

There isn't a box specifically for "SIPP" contributions but there is one for pension payments where basic rate relief has been given at source.

Check out box 1 on page 4 of the 2017:18 return.

These type of pension contributions increase the amount of the basic rate tax band which can in turn reduce the amount of higher rate tax payable.

For example last year the basic rate band was £31,500 so a gross contribution of £2,500 (£2,000 paid into the SIPP plus the £500 basic rate relief added to the pension fund) would result in a basic rate band of £34,000.