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Can you change your tax band by opening a SIPP?
C_Mababejive
Posts: 11,668 Forumite
in Cutting tax
Example,,
An individual already pays into an employee pension scheme via his pay with his employer.
His total income for a tax year is such that he is some way into the higher rate tax band (40%).
If he opens and pays into a SIPP ,is it possible that by doing so, his overall tax position could be moved to the basic rate tier?
If so,how so and how does it work?
Thanks
An individual already pays into an employee pension scheme via his pay with his employer.
His total income for a tax year is such that he is some way into the higher rate tax band (40%).
If he opens and pays into a SIPP ,is it possible that by doing so, his overall tax position could be moved to the basic rate tier?
If so,how so and how does it work?
Thanks
Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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Comments
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Yes, whatever the amount that falls into the 40% tax bracket - pay 80% of this amount into a SIPP.0
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Yes, whatever the amount that falls into the 40% tax bracket - pay 80% of this amount into a SIPP.
Thanks,,so you are not actually changing your tax bracket as assessed by HMRC,you are reducing your effective rate of tax????Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..0 -
Remember to include savings interest and dividends together with taxable salary to work out how much you need in the SIPP as it may be more than you think.0
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Also (depending on the type of scheme at the employment) it may be possible to pay more into the employment scheme. You may get lower fees than a SIPP.0
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sorry if this is a stupid question, but why do you only pay 80% of the amount that falls into the higher rate band, why not 100%
thanksSAVE £25000 IN 2018 25600/25000 NO. 118
SAVE £30000 IN 2019 3000/30000 NO. 140 -
Because the other 20% is claimed back by your Sipp as basic tax relief.
You then have to claim the higher tax relief yourself, on the gross amount you contributed to the SIPP. I.e your net deposit + the 20% tax relief0 -
oh right I see
thanks for replySAVE £25000 IN 2018 25600/25000 NO. 118
SAVE £30000 IN 2019 3000/30000 NO. 140 -
You might also be able to increase your pension contributions though your employer's scheme. If it's salary sacrifice, then you'll also save NI on the payments, and if you're really lucky, the employer may pass on their saving too.
The downside is, an employer's scheme generally has less choice when it comes to funds."Real knowledge is to know the extent of one's ignorance" - Confucius0
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