How much tax relief will I receive?
As an incentive to save for your retirement, when you make a pension contribution, you receive tax relief of up to the highest rate of tax you pay. How much depends on your circumstances.
Your contributions automatically receive 20% basic- rate tax relief. This means the government in effect pays 20%. For example, to make a £10,000 SIPP contribution, you pay £8,000 and £2,000 tax relief is automatically added. We reclaim the basic-rate tax relief and credit it to your account 6 to 11 weeks later.
If you pay tax at 40% you can claim back up to a further 20%, reducing the effective cost of a £10,000 contribution to as little as £6,000. 45% -rate taxpayers can claim back up to 25%, reducing the effective cost to as little as £5,500. You must pay sufficient tax at the higher rates to claim the full tax relief.
The extra tax relief can be reclaimed via a tax return or by contacting your local tax office. It is not automatically added to your SIPP, but is accounted for by a reduction in the amount of tax you pay. If you wish, you can use the extra tax relief to make a contribution to your SIPP, however, this will be classified as a new pension contribution so please ensure you remain within your contribution limits.
Even if you have no earnings you can still benefit from tax relief - you can pay up to £3,600 in total to pensions each tax year, of which the government will automatically pay up to £720.
Whilst these are the current rules, all tax rules may change in the future. If you’re a Scottish taxpayer different tax bands and rates of tax relief apply.
Before applying, please understand the risks and features of the HL SIPP.