Are pensions a no brainer...?

[Arnoldthecat]

Picture this scenario.

A person has a gross income which drives them well into the 40% bracket. One of the big drivers for that is dividend income. The person dumps money into a sipp to raise their 20% bracket and thus ensure they only pay 7.5% tax on divis rather than 32.5% (?).

Paying money into a sipp is a good plan right??

Say you sell 10k worth of shares so you are no longer paying tax on the divis for those shares.

You shunt that money into a sipp and buy the shares back.

So now in your sipp you have the same shares, your getting the divis tax free rolled up in the sipp and you have had a 20% boost in the form of TR.

Hopefully they continue growing.

On the output side you get 25% tax free. Anything else is taxed at say 20% as you might be retired.

Its a big win win,,or am i missing something ??

Thanks

Make sure the shares are eligible to be held in a SIPP, and that your earned income is high enough for the contribution you want to make (as in you only get tax relief on up to 100% of net relevant earnings).

Dividend income... rings an alarm bell... something about it not getting tax relief when paid into a pension.

A person has a gross income which drives them well into the 40% bracket. One of the big drivers for that is dividend income.
So what is their income without the dividend income? I think that would then determine how much they can pay into a pension and get tax relief.

Without divi income i am in the basic tax band. I am currently paying money into a sipp each tax year to bring my basic rate band up thus minimisung the amount of tax i have to pay.i.e avoiding the higher rate band. I am slowly migrating the dividend producing assets into ISAs and pensions

This may or may not be of any help.
www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Using the ISA allowance sounds a good idea to me for any income which is not able to get tax relief if paid into the SIPP.

to bring my basic rate band up thus minimisung the amount of tax i have to pay.
I don't know what you mean by that, but then I'm not a pension expert.

I would just be careful about knowing how much you can pay into the SIPP and get the tax relief, as your SIPP provider may be claiming that for you at 20% on anything you put in.