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Loss of starting rate savings allowance

Is a SIPP contribution classed as other income causing loss of starting rate savings allowance?

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Hi
This tax year (22/23) I have the opportunity to earn about £25k by doing part time work. If I placed this £25k in a SIPP would this mean that my only other income (which consists of £10k state pension and about £7,500 interest from investments) would still be tax free by virtue of being less than £17,570? Or would my £25k pension contribution still be classed as "other income" causing me to lose my £5k Starting Savings Allowance?

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By Not Anonymous
04th May 2022 08:26

This was answered on your original post.

But no, contributing to a SIPP will get you basic rate tax relief added to your pension (£5,000 or £6,250 depending on whether the £25k is net or gross) but it won't stop the £25k earnings from part time work being taxable.

It will increase your basic rate band from £37,700 to £62,700 or £68,950.

The £25k pension contribution will not be classed as other income (why would it?). But you do have £25k of earnings.

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By rmillaree
04th May 2022 08:28

Contributions to SIPP do not change your taxable income levels - they simple extend basic rate bands (that will not affect you at your quoted income level) - note contributions may affect your "adjusted income" - but adjusted income isnt relevant ref loss of savings allowance.

Note pension contributions are not other income they are simply ignored ref working out your taxable income.

Note you cannot add more than 100% of earned income into your sipp (salary only based on your example) - dont forget that fact and the fact the that gross addition to sipp will be cash contribution + 25% if you add in personally.

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By Duggimon
04th May 2022 10:36

The contribution to the SIPP is not classed as other income. Your income is classed as income and what you choose to do with it doesn't change the fact it is income.

Earning £25K in self employed income means you do not get the extra zero rate band on savings income.

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