Does anyone know if you can get still get SIPP tax relief in the same year as you get EIS relief? Even if you have claimed back most/all of tax paid?
Hypothetical example: suppose you earned £50k in tax year ending April 2020. You paid 7.5k tax on that. You also invested 25k in crowdfunding companies that year (including freetrade of course), and so you claimed back the 30% EIS relief for a 7.5k refund from the tax man, reducing your (income) tax burden to zero. Can you then put say 10k into a SIPP that same tax year and get that 10k topped up to 12k through the 20% SIPP contribution relief?
I always take issue with the media reporting on how much money the government ‘loses’ from SIPP tax relief. It’s not so much tax relief as tax deferral, you are still taxed on the money when you draw it out. If it didn’t exist it would be double taxation. Taxed once on the way in and again on the way out. If it were removed, no additional tax would be collected and instead tax receipts would go down since anyone with half a brain would stop paying into their pension.
From a pure tax point of view, SIPPs make a lot of sense via salary sacrifice as both you and your employer save on National Insurance, even more so for higher rate tax payers. From a long term planning point of view, salary sacrifice forces people to put money away and save without being able to access it, a bit like real estate and mortgages with accumulating house equity.