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.
No - but the grossed up value of your payment extends your basic rate band therefore providing higher rate relief if due - the basic rate relief will be provided by the extra 25% of the cash sum you add to your pot also being added in to your sipp by hmrc - 20% of grossed up value.
Some people say the increased allowance threshold only effects earned income with no reduction in tax on divis or CGT.
There is no increased allowance - there is increased basic rate band so this statement is kinda gibberish - but not fully as its possible there could be some reduction in tax due - how the tax due is compcicated by the fact the calculations are done in the most efficient way and full details are needed before we can be cerftain how everything will be allocated (allowances) and taxed - practicably speaking though you are likely to get higher rate relief if you have paid higher rate tax !!
Other sources suggest I can use the increased allowance against everything.
hopefully above poiint has answered this one
I have spent hours trying to get my head round this issue and so would appreciate a clearing of the fog.
if you post some example numbers someone will probably run a calc for you - they need tol be full and complete - eg salary cgt and type of cgt and dividend income and net/grossed up value of sipp payment made