Information for clients with a Rathbones SIPP

SIPP contributions may receive tax relief – you can contribute as much as you like, but tax relief is only available on contributions up to 100% of your earnings (or £3,600 if you earn less than £3,600). If you earn over £60,000, there’s also an annual allowance (a limit on tax free contributions you can make per year) – currently £60,000 for most people (it starts to ‘taper’ after you earn more than £200,000). If you go over the allowance, you might have to pay a tax charge on the excess, but you may be able to use “carry forward” to cover the extra using unused allowance from the previous three years.

In terms of what the tax relief is, assuming your contributions are made from money you’ve already been taxed on (because pension contributions made by your employer directly from your salary are usually done before deducting Income Tax, meaning you haven’t paid tax on these contributions, so you don’t need to claim anything back) everyone will get 20% basic tax relief automatically added to their personal pension contribution by their pension provider. As an example for a basic rate taxpayer, if they contribute £1,000 to their pension, their pension provider will add £250 (20% of their contribution) to their pension, making the total contribution £1,250. If they’re a higher or additional rate taxpayers, they could then claim 20% (£250, in this example) back in their annual Self-Assessment to HMRC, meaning their £1,000 contribution has actually cost them £750.

Another advantage of pensions is that investment gains made in a pension are not subject to UK Capital Gains Tax (CGT).

When it comes to tax implications on making withdrawals from your SIPP, you can take up to 25% of your pot tax-free from age 55 (rising to 57 in 2028) up to a limit of £268,275, but the rest of your withdrawals will be taxed as income.