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Posted Sat, 23 Sep 2023 21:15:15 GMT by Oggy123
Hi so my query is regarding 40% tax relief on SIPP contributions. So my salary is currently £50520 and I am in the teachers pension scheme which means my employer (via PAYE) deducts 9.6% from my monthly salary (around £404/mth or £4848/yr). If I was to then pay extra money into a SIPP would I get just 20% tax relief (as it would be based on my adjusted net income of £45672) or would I be entitled to the full 40% on my SIPP contributions (as it would be based on my gross £50520 salary)? Finally, if it is based on adjusted net income, would I only recieve 40% tax relief on my SIPP contributions if my gross salary was £50270 + £4848 = £55118? Thanks
Posted Mon, 25 Sep 2023 20:05:21 GMT by sportyfae
@Oggy123 Your salary is often irrelevant for tax purposes, it's your taxable income which counts. Which with a net pay scheme like the TPS is significantly less than your salary. So if the only taxable income you have is the £45,672 then you would automatically receive basic rate tax relief on your relief at source (RAS) contributions to the SIPP but unless you are a Scottish taxpayer no further relief will be due. If your taxable income was above £50,270 then you might receive some higher rate relief but it is limited by how much higher rate tax you pay. Say your taxable earnings were £50,500 and you contributed £5,000 (gross) to a SIPP. You would normally save an £46 in higher rate tax relief. Being £230 extra which is taxed at 20% instead of being taxed at 40%.

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