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Where Taxpayers and Advisers Meet

Sipp

Eli
Posts:4
Joined:Mon Apr 04, 2022 11:41 am
Sipp

Postby Eli » Mon Apr 04, 2022 11:48 am

Hello, i have recently opened a SIPP account and topped up the account. I haven't yet invested any funds though. If I keep the cash on the sipp account uninvested, will I still able to detract that amount from my overall taxable income? Many thanks if anyone can help me understand

D&C
Posts:153
Joined:Mon Nov 25, 2019 11:35 pm

Re: Sipp

Postby D&C » Mon Apr 04, 2022 9:01 pm

It's irrelevant what you do with the money inside a SIPP, it never ever reduces your taxable income.

The gross contribution does reduce your adjusted net income, which is used to calculate the Personal Allowance, Married Couple's Allowance and High Income Child Benefit Charge.

The gross contribution also increase the amount of your basic rate tax band.

For example say you pay over £4,000. The pension company will add 25% in basic rate tax relief making a gross contribution of £5,000.

Your taxable income is unchanged but your adjusted net income is reduced by £5,000 and your basic rate tax band increased by £5,000.

Eli
Posts:4
Joined:Mon Apr 04, 2022 11:41 am

Re: Sipp

Postby Eli » Wed Apr 06, 2022 5:06 pm

Thank you that's what I meant but didn't use the correct words! Very helpful thank you for your reply


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