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Posted Thu, 29 Feb 2024 12:42:44 GMT by Kevin Frost
I am aware that, as a basic rate taxpayer, of getting a 20% tax relief on my SIPP contributions, added to my pension. As I understand it, higher and additional tax payers can claim back a rebate from HMRC proportional to the elements where tax was paid at these higher rates. For instance as well as getting a 20% boost in the SIPP, a 40% higher tax payer can claim a rebate of an extra 20% on the proportion of income where tax is paid at 40% or an additional tax payer, a 25% rebate.. But how does it work if one enters the higher or additional bands due only to Capital Gains based on the sale of residential property taxed at 18% and 28% instead of the usual income tax rates of 20%, 40% and 45%? For instance, for the proportion of the capital gain that would have been taxed at 40% or 45% if it were instead earned income... Is a tax rebate still available at an extra 20% for the income proportional to that in the higher rate band(or 25% if in the additional band)? Or is this rebate reduced due to it being originally taxed at 28% instead of 40% (or 45%) because it is property CGT? Or is an additional rebate simply not available if based on capital gains? Also, I understand that aside from the £60k overall annual limit for 2023/34, the limit I can pay into a pension is 100% (i.e. 80% from me +20% tax relief) of my annual earned income, so the maximum cannot be based on property rental income or CGT, is that correct. Is my understanding of "Qualified Earnings" correct?
Posted Fri, 01 Mar 2024 09:46:47 GMT by HMRC Admin 25
Hi Kevin Frost,
The pension payments would increase the basic rate band so whilst you may not benefit from it under the employment, it would mean that more of the capital gain would be taxed at 18% rather than 28%.
Your pension is limited to 100% of your salary so the gain is not included when working out any potential input.
Thank you. 

Posted Fri, 01 Mar 2024 11:32:02 GMT by Kevin Frost
Thanks for that, what about the query about the rebate of the difference between the basic and higher/additional rate? A higher rate tax payer can get a rebate of an extra 20% (25 for an additional rate taxpayer), that is, over and above the basic 20% tax relief added by the SIPP provide, for pension contributions up to the corresponding amount of tax paid at higher or additional rates respectively. If one is in the higher rate band as a result of property CGT, can an additional rebate of 20%, 8% or nothing be claimed as a rebate, over and above the basic 20% tax relief added by the SIPP provider?
Posted Thu, 21 Mar 2024 12:04:53 GMT by HMRC Admin 20
Hi Kevin Frost,
The higher rate relief for the pension only applies to income tax. as you state that you are only higher rate due to capital gains, no further relief on the pension payment is due.
Thank you.


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