Personal pension contribution tax relief reducing income

kitty5

Hi all
i paid 10000 gross into an Aviva pension in the previous tax year. 

I also had savings interest that will exceed the £1000 allowed as a basic rate tax payer. Think this is likely to be around 2000.

I also pay into LGPS. 
Will the payment to Aviva reduce my income and as a result mean not being liable for paying the tax on the interest? 

Thanks in advance. 

Dazed_and_C0nfused

kitty5 said:

Hi all
i paid 10000 gross into an Aviva pension in the previous tax year. 

I also had savings interest that will exceed the £1000 allowed as a basic rate tax payer. Think this is likely to be around 2000.

I also pay into LGPS. 
Will the payment to Aviva reduce my income and as a result mean not being liable for paying the tax on the interest? 

Thanks in advance. 

No, it has no impact on the amount of taxable income.

But it will increase your basic rate band from £37,700 to £47,700.

vixen1500

Dazed_and_C0nfused said:

But it will increase your basic rate band from £37,700 to £47,700.

Apologies for jumping in on your post.

I am in the process of completing tax returns for 24/25.

Was uncertain if or where I had to include payments made into SIPP.

I entered a figure into the section 'paying into PPR' though not sure whether in should go into schemes 01 or 05.

It didn't alter the amount of tax due.

But I then got the same message  saying the basic rate limit for pension payments had been increased.

Could you please explain what that means?

Thanks

Nomunnofun1

vixen1500 said:

Dazed_and_C0nfused said:

But it will increase your basic rate band from £37,700 to £47,700.

Apologies for jumping in on your post.

I am in the process of completing tax returns for 24/25.

Was uncertain if or where I had to include payments made into SIPP.

I entered a figure into the section 'paying into PPR' though not sure whether in should go into schemes 01 or 05.

It didn't alter the amount of tax due.

But I then got the same message  saying the basic rate limit for pension payments had been increased.

Could you please explain what that means?

Thanks

You must enter the contribution to the SIPP. 

Enter the amount that you actually paid plus 25% (grossed up amount for basic rate) e.g. if you paid £8000 you enter £10000. The entry is in box 1 below. Pay attention also to box 1.1.

Let’s say that your taxable income is £60270. Your tax will be calculated as follows:

12570 free of tax 
37700 at 20%

10000 at 40%

If you contribute £8000 to a SIPP this will be made up to £10000 by the provider.

Your tax will now be calculated as follows:

12570 free of tax 
47700 at 20%

The basic rate threshold has been increased by £10000. Tax liability is reduced by £2000.

vixen1500

Thanks, so paying into a SIPP means you can have another £10,000 income and it will only be taxed at the 20% rate.  That's something I was totally unaware of.

Nomunnofun1

vixen1500 said:

Thanks, so paying into a SIPP means you can have another £10,000 income and it will only be taxed at the 20% rate.  That's something I was totally unaware of.

An additional £10000 of income will be taxed at 20% as opposed to 40% - correct!