I would appreciate guidance over the effect that extra pension contributions have with regard to tax thresholds for both dividend income and CGT.
I have a salary of around £40K and, in this year , expect to receive dividend income from shares and expect to face a CGT liability also. I have read various on-line articles on the relevant tax treatment but much of this is contradictory. What I would like to know is that if I make significant contributions to my SIPP, will it increase my basic personal tax allowance (up beyond £12,500) so that I can less tax on divis and CGT by virtue of a raised allowance.
Some people say the increased allowance threshold only effects earned income with no reduction in tax on divis or CGT.
Other sources suggest I can use the increased allowance against everything.
I have spent hours trying to get my head round this issue and so would appreciate a clearing of the fog.
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