Extracting Basic Rate Tax Relief to outside SIPP wrapper/ Put-through transactions
Posted: January 30th, 2020, 4:50 pm
Hello to all Pensions experts outside there, is anyone here familiar with the mechanics of a "put-through" transaction involving a SIPP?
In short, i am a higher rate tax payer and have always been curious about the situation where if i make personal contributions then a) I receive basic rate tax relief that stays inside the SIPP wrapper b) I claim higher rate relief via my tax return but this money is effectively outside the SIPP wrapper
is there anything legally saying that basic rate relief must remain inside the wrapper?
I have been looking into so called "put through" transactions where
1. You make a personal SIPP contribution of say £20k, which then gets grossed up by basic rate relief to £25k
2. You effectively sell £25k worth of shares you hold outside the SIPP wrapper to your SIPP via a broker. Those shares then show in the SIPP with value £25k and £25k cash is then sat outside the SIPP. Hence the maths is that the basic rate relief is effectively extracted from an economic point of view and you can still claim higher rate relief also
The advantage of doing this is that I still get full tax relief on contributions but by extracting the basic rate relief, more money is sat outside the SIPP that I can easily access
is anyone actively doing this kind of strategy?
In short, i am a higher rate tax payer and have always been curious about the situation where if i make personal contributions then a) I receive basic rate tax relief that stays inside the SIPP wrapper b) I claim higher rate relief via my tax return but this money is effectively outside the SIPP wrapper
is there anything legally saying that basic rate relief must remain inside the wrapper?
I have been looking into so called "put through" transactions where
1. You make a personal SIPP contribution of say £20k, which then gets grossed up by basic rate relief to £25k
2. You effectively sell £25k worth of shares you hold outside the SIPP wrapper to your SIPP via a broker. Those shares then show in the SIPP with value £25k and £25k cash is then sat outside the SIPP. Hence the maths is that the basic rate relief is effectively extracted from an economic point of view and you can still claim higher rate relief also
The advantage of doing this is that I still get full tax relief on contributions but by extracting the basic rate relief, more money is sat outside the SIPP that I can easily access
is anyone actively doing this kind of strategy?