Pension tax relief if paying higher rate capital gains tax

tg99

Hi, is anyone able to confirm if the following is correct:

1. If you have savings income of £15k and dividend income of £15k but no employment earnings and want to make the max £3600 gross pension contribution you still only receive/can claim 20% tax relief even if you have capital gains (eg £40k) that pushes you into the higher rate tax band for a portion of those gains. Since the tax relief is based on income tax paid and does not consider rate paid on capital gains.

2. Same scenario as 1 above - the personal savings allowance (PSA) would still be £1k and the £5k savings income tax free element would still apply as neither is affected by the capital gains pushing into the higher rate band.

3. If you have savings income of say £30k and dividend income of £30k but no employment earnings and want to make the max £3600 gross pension contribution you are able to receive/can claim 40% tax relief since you now pay income tax at 40%. 

Thks 

Dazed_and_C0nfused

tg99 said:

Hi, is anyone able to confirm if the following is correct:

1. If you have savings income of £15k and dividend income of £15k but no employment earnings and want to make the max £3600 gross pension contribution you still only receive/can claim 20% tax relief even if you have capital gains (eg £40k) that pushes you into the higher rate tax band for a portion of those gains. Since the tax relief is based on income tax paid and does not consider rate paid on capital gains.

2. Same scenario as 1 above - the personal savings allowance (PSA) would still be £1k and the £5k savings income tax free element would still apply as neither is affected by the capital gains pushing into the higher rate band.

3. If you have savings income of say £30k and dividend income of £30k but no employment earnings and want to make the max £3600 gross pension contribution you are able to receive/can claim 40% tax relief since you now pay income tax at 40%. 

Thks 

1.  AIUI your basic rate band would be increased by £3,600 so there would potentially be some benefit from a CGT perspective.

2.  CGT comes last in the tax equation so with no non savings non dividend income and no liability to higher rate tax you would get all 3 of the 0% tax bands, savings starter rate (£5,000), savings nil rate (£1,000) and dividend nil rate (£1,000).

3.  Yes, your basic rate would be increased by £3,6000 meaning more income charged at 20% and less at 40%.

tg99

Dazed_and_C0nfused said:

tg99 said:

Hi, is anyone able to confirm if the following is correct:

1. If you have savings income of £15k and dividend income of £15k but no employment earnings and want to make the max £3600 gross pension contribution you still only receive/can claim 20% tax relief even if you have capital gains (eg £40k) that pushes you into the higher rate tax band for a portion of those gains. Since the tax relief is based on income tax paid and does not consider rate paid on capital gains.

2. Same scenario as 1 above - the personal savings allowance (PSA) would still be £1k and the £5k savings income tax free element would still apply as neither is affected by the capital gains pushing into the higher rate band.

3. If you have savings income of say £30k and dividend income of £30k but no employment earnings and want to make the max £3600 gross pension contribution you are able to receive/can claim 40% tax relief since you now pay income tax at 40%. 

Thks 

1.  AIUI your basic rate band would be increased by £3,600 so there would potentially be some benefit from a CGT perspective.

2.  CGT comes last in the tax equation so with no non savings non dividend income and no liability to higher rate tax you would get all 3 of the 0% tax bands, savings starter rate (£5,000), savings nil rate (£1,000) and dividend nil rate (£1,000).

3.  Yes, your basic rate would be increased by £3,6000 meaning more income charged at 20% and less at 40%.

Thanks.

1. yes there is that benefit of the basic rate band increase. For 3. I was meaning as well as the basic band increase would you still also get the additional 20% tax relief on the £3600 contribution, ie as well as paying £2880 into sipp and then having that grossed up to £3600 with basic rate relief at 20% you could also claim an additional 20% tax relief from hmrc since you would be a higher rate 40% taxpayer due to combined dividend and income earnings above the basic rate band (even after allowing for the £3600 increase). As opposed to 1. where only 20% relief possible.

Jeremy535897

Yes you would.