Tax relief in final year of working

Dazed_and_C0nfused

Workerbee999 said:

Thanks, I’ll have to do some modelling! When does the starter rate apply, is it the next £5k straight after the £12,570? So maybe sacrifice down to £12,570, put 12,750 into a SSIP to get the extra 20% tax relief, then be able to get the £5k starter savings rate as well as the £1,000

If only the 25% tax free amount is taken out of a SSIP in tax tax year, does that mean no earned income so 17,570 could be earned in interest? ( not that it would be that much).

The savings starter rate depends on how much basic rate band has been used by non savings non dividend income.

So if earnings are the only income to be considered and they are £12,570 then the full £5,000 would be available.

If earnings were say £13,250 then there would be £4,320 of savings starter rate band available.

If the only pensionable income was earnings of £12,570 then £10,056 could be added to a SIPP and the pension company would add 25% of that making a gross contribution of £12,570.  You cannot contribute £12,570 and get tax relief added on top if your earnings are only £12,570.

Not sure what relevance a TFLS has to this?  The savings starter rate is determined by the amount of taxable non savings non dividend income.  If there is none then all the Personal Allowance would be available plus the full £5,000 savings starter rate band.  Plus the savings nil rate band.

So depending on the Personal Allowance due (£11,310 or £12,570) there would be £17,310 or £18,570 in interest which could be received before any tax was actually payable.

Workerbee999

Thank you very much for taking the time to answer my questions. I need to work some scenarios out in a spreadsheet now 😂 - some combination of salary sacrifice saving NI and maybe becoming tax free AVC later when the DB kicks in, using SIPP for RAS to get some more tax relief from grossing up, and getting a view on how much interest there could be in the year to see if the savings starter rate would be beneficial. There must be some sort of sweet spot in there somewhere!!