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SIPP contributions to get lower rate tax
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adamjoeite
Posts: 23 Forumite


in Cutting tax
With income of £88k and bank interest of £1.5k, I would like if possible to reduce my tax band to lower rate. My tired brain is struggling so could anyone help me in calculating what SIPP contributions would be needed to facilitate this?
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adamjoeite said:With income of £88k and bank interest of £1.5k, I would like if possible to reduce my tax band to lower rate. My tired brain is struggling so could anyone help me in calculating what SIPP contributions would be needed to facilitate this?0
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No, Northern Irish0
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adamjoeite said:No, Northern IrishYou would then inform HMRC of the gross contribution of £39230 to obtain additional relief of £7846.All of your income above the personal allowance would be charged at 20%.0
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adamjoeite said:With income of £88k0
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Are you employed and already making some pension contributions to your workplace pension?0
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Nomunnofun1 said:adamjoeite said:No, Northern IrishYou would then inform HMRC of the gross contribution of £39230 to obtain additional relief of £7846.All of your income above the personal allowance would be charged at 20%.0
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Grumpy_chap said:adamjoeite said:With income of £88k0
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Albermarle said:Are you employed and already making some pension contributions to your workplace pension?0
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adamjoeite said:Nomunnofun1 said:That would require a contribution to a SIPP of £31384 which will be grossed up to £39230 by HMRC. I would be giving myself some headroom though. If it’s for 2024/25 tax year that has to be done today.You would then inform HMRC of the gross contribution of £39230 to obtain additional relief of £7846.All of your income above the personal allowance would be charged at 20%.
My understanding is that SIPP contributions do not reduce your earnings, but rather extend the basic rate tax range. (Payment into a pension by salary sacrifice could achieve a change in your PSA, as then you are agreeing to a salary reduction in exchange for higher employer pension contribtutions.) In other words, I think the sum of your salary, savings interest and dividends determines your PSA and thereafter this cannot be altered.0 -
etienneg said:adamjoeite said:Nomunnofun1 said:That would require a contribution to a SIPP of £31384 which will be grossed up to £39230 by HMRC. I would be giving myself some headroom though. If it’s for 2024/25 tax year that has to be done today.You would then inform HMRC of the gross contribution of £39230 to obtain additional relief of £7846.All of your income above the personal allowance would be charged at 20%.
My understanding is that SIPP contributions do not reduce your earnings, but rather extend the basic rate tax range. (Payment into a pension by salary sacrifice could achieve a change in your PSA, as then you are agreeing to a salary reduction in exchange for higher employer pension contribtutions.) In other words, I think the sum of your salary, savings interest and dividends determines your PSA and thereafter this cannot be altered.Personal Savings Allowance
You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you’re in. This is your Personal Savings Allowance.
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