I wanted to clarify whether paying excess of annual allowance effectively gives rise to two taxable events on the excess amount - both on the initial contribution and on the withdrawal.
For example, if I exceed my Annual Allowance by say £10k I have to pay tax on the excess at say 40% leaving £6k sitting in my SIPP.
When I finally drawdown the pension, assuming now a basic rate payer and no growth on the contribution, I could then withdraw 25% tax free = £1500 plus the remainder less 20% tax = £3600. So my net receipt is £5100 which is an equivalent tax rate of 49%.
Is this correct?
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