Investments in SIPPs grow free from Income Tax and Capital Gains Tax. You also get tax relief on your pension contributions. Any money you invest in your SIPP will be topped up by 20% by the taxman, and higher or additional-rate taxpayers can claim back a further 20% or 25% respectively. Tax relief is limited by your annual earnings and the pension annual allowance.
Tax relief on pension contributions
Here we show you how three investors paying different Income Tax rates get tax relief on a £12,500 contribution into a SIPP or other pension:
Children and people who don’t pay tax can also make pension contributions of up to £2,880 a year. With basic-rate tax relief this will make a total contribution of £3,600 a year into the SIPP or other pension.