SIPP tax benefits
Pensions, such as a SIPP, are one of the most tax efficient ways of saving for retirement.
Pension contributions receive up to 50% tax relief. How much will depend on your circumstances.
- Standard rate
taxpayer (20%) - Higher rate
taxpayer (40%) - Additional rate
taxpayer (50%) - Non tax
payer (0%)
How you could turn £8,000 into £10,000
If you invest £8,000 in a SIPP, the government automatically adds £2,000 (20%) tax relief increasing your total contribution to £10,000.
Remember, tax rules can change over time and the relief you receive will depend upon your circumstances.
How you could turn £6,000 into £10,000
If you invest £8,000 in a SIPP, the government automatically adds £2,000 (20%) basic tax relief. You can claim back up to a further £2,000 (20%) higher rate tax relief via your tax return. £10,000 in a SIPP could therefore cost you as little as £6,000.
You can do what you like with the higher rate tax you get back. Some clients reinvest it in their SIPP and receive another round of tax relief.
You must pay sufficient tax at the higher rate to claim the full higher rate tax relief via your tax return. Remember, tax rules can change over time and the relief you receive will depend upon your circumstances.
You could get up to 60% tax relief if you earn more than £100,000
Download our Guide to Claiming Higher Rate Tax Relief
How you could turn £5,000 into £10,000
If you invest £8,000 in a SIPP, the government automatically adds £2,000 (20%) basic tax relief. You can claim back up to a further £3,000 (30%) higher and additional rate tax relief via your tax return. £10,000 in a SIPP could therefore cost you as little as £5,000.
You can do what you like with the higher/additional rate tax you get back. Some clients reinvest it in their SIPP and receive another round of tax relief.
You must pay sufficient tax at the higher/additional rate to claim the full tax relief via your tax return. Remember, tax rules can change over time and the relief you receive will depend upon your circumstances.
Download our Guide to Claiming Higher Rate Tax Relief
You don't need earnings to receive tax relief
If you have no earnings (for example, the retired, non-working, spouses or children) you can still contribute up to £3,600 gross each tax year to a pension and receive 20% tax relief.
If you contribute the full £3,600, the government will automatically pay £720 in tax relief, reducing the amount you pay to just £2,880.
Remember tax rules can change over time and the relief you receive will depend upon your circumstances.
Additional tax benefits
- No capital gains tax or further income tax
Investments in a pension can grow free of UK capital gains tax and income tax (tax deducted from dividends cannot be reclaimed).
- Up to 25% tax free lump sum when you retire
Anytime from age 55, you can normally take up to 25% of your SIPP as a tax free lump sum, and a taxable income from the remainder if you wish.
- No inheritance tax if you die before retiring
If you die before taking benefits from your pension, and before reaching age 75, the fund will normally be passed to your spouse or other elected beneficiary free of inheritance tax.
Important information
The pension and tax rules are subject to change by the government. Tax reliefs and state benefits referred to are those currently applying. Their value depends on your individual circumstances.
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Important information
A SIPP is a type of pension for people comfortable making their own investment decisions. Investments go down in value as well as up so you could get back less than you invest. The rules we refer to are those that currently apply; they could change in the future but you cannot normally access the money until at least age 55. Tax reliefs depend on circumstances. This website is not personal advice, if you are unsure of an investment’s suitability you should seek advice.
Have a question?
- Read our SIPP FAQs
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