What tax relief is available on contributions to the HL SIPP?
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. You’d only need to pay in £2,880 and the government will automatically pay up to £720. If you’re a Scottish taxpayer different tax bands and rates of tax relief apply.
Whilst these are the current rules, all tax rules may change in the future.
Before applying, please understand the risks and features of the HL SIPP.