How do SIPP contributions impact tax bands?

Hi, I am looking for some help about the impact of my SIPP contributions, given my income is narrowly crossing the £50,270 threshold. My salary has recently increased so that it will work out at a taxable income of around £50,650 for the 23-24 tax year (my work pension contributions are deducted before tax). I assume this will make me a higher rate payer (though so far I have only been taxed at 20%) and hence unexpectedly reduce my interest allowance from £1000 to £500. I anticipate that I will have an interest income of around £990 this year and hence expect I will now need to pay 40% on the extra £490, however, in addition to my workplace pension I have made some small SIPP contributions. I have two questions about their impact on the above situation: 1. I have already paid £400 into a SIPP this year so I wondered if this would be treated as reducing my income to below the threshold, as it would if I were paying the extra £400 in to my employee pension? 2. Would any further SIPP contribution this year impact the 40% tax I expect on the £490 interest above the £500 allowance? I hope that makes sense and would really appreciate any advice on all this. Thanks, Michael

Hi,

1. Yes, you would be able to claim relief on the payments for the amount you are above the higher rate tax band.
2. You can only claim relief on the pension contributions for the amount you are above the higher rate threshold.

Thank you.

 

I'm in a similar position, so wanted to make sure I understand the reply. Ref 1. The SIPP contribution will allow a reclaim of the high rate tax on salary. Please correct if wrong. Ref 2. Would the additional SIPP contribution allow a reclaim of the high rate tax on interest? Thanks.

Hi,

Please see guidance:

Tax on your private pension contributions

Thank you.