Does a SIPP Income Tax you twice?? Self Employed Question.

Bachelorplace

I really appreciate this ladies and gents and don't want to come across pedantic or argumentative. I will dish out my Thanks in a sec. 

Geoff.... Nicely explained. 

Right got it. ... I think.

I am going to do some more googling before I wind you lot up too much and post back the bits I don't get. 

tichtich

Bachelorplace said:

Surely if you have paid tax on the earnings leading to your NET profit of £10k being invested, why would you need to pay income tax again when you want to spend it. 

I wonder if there's been some confusion over the term "NET profit". Anyway, here's an example to clarify.:

Earnings: 11K
Expenses: 1K
Profit: 10K
Income tax: 2K
Net income (after tax): 8K
You put into SIPP: 8K
Tax relief added to SIPP by tax man: 2K
Total in SIPP: 10K (ignoring any growth)
In retirement, you draw down 10K, which is taxable. (Ignore the tax-free lump sum for now.)
You pay 2K tax, and receive 8K, the same amount that you put in. So you've still only paid 2K tax on your 10K income.

In fact you can take 2.5K (25%) tax free, so you would only pay tax of 20% x 7.5K = 1.5K, leaving you with 8.5K.