SIPP tax benefits

Prospective investors may invest through a SIPP, subject to its terms. Income generated from investments made via a SIPP is not taxed and growth is free from CGT. EIS tax reliefs are not available to those investing via a SIPP. If you are contemplating investing via a SIPP you should contact your independent financial adviser authorised under the Act and the SIPP trustee.

Income tax relief

Subject to certain limitations, contributions to a SIPP receive basic rate income tax relief and higher rate tax relief (if applicable) in relation to your annual tax bill. Individuals with income in excess of £130,000 for a tax year may also be liable to a special annual allowance charge on pension contributions and benefits accrued in excess of an annual allowance of £20,000. The effect of the annual allowance charge is the loss (or removal) of the individuals entitlement to receive income tax relief at the higher (or additional) rate. In addition, up to 25% of the fund (subject to a maximum of 25% of the standard lifetime allowance which, for 2010-11 is £1,800,000) invested in the SIPP can be taken as a tax-free lump sum on retirement. Income tax - but not national insurance contributions - is payable on the pension that is paid from the remaining SIPP.

Corporate tax relief

If your employer is subject to UK corporation tax, it may be able to reduce its corporation tax and national insurance liabilities by making contributions to your SIPP and its contributions will not be taxable as part of your pay.

Inheritance tax

If you die prior to retirement, there is no inheritance tax payable on assets distributed from your SIPP by way of a lump sum within two years of the date of your death.