In today’s taxation-happy economic environment, pensions represent the finest legitimate tax planning and tax deferral vehicle available. The following four sections outline an unrivalled opportunity to save tax, which should be given your serious consideration. Income tax Corporation tax Capital gains tax Inheritance tax Lifetime allowance recovery charge To find out how you can save tax, please contact our taxation team by going to our contact area. Income Tax You get tax relief on your own contributions at the highest rate you pay. As a higher rate tax payer you will get £40 tax relief for every £100 that you contribute. For a basic rate tax payer relief will be £22 for every £100 contribution. One of the benefits of a SIPP is that 25% of the pension fund can be taken as a tax free lump sum. Income tax - but not national insurance contributions - is payable on the pension that is paid from the remaining fund. Your pension fund can grow free of income tax (with the exception of dividends from UK shares). For example, if your SIPP holds commercial property, it can receive rental income without paying tax. For more information, go to our property section. Corporation tax Companies can reduce both their corporation tax and national insurance liabilities by making contributions to a SIPP on behalf of employees. Contributions are not taxable on the employee as part of their pay. Capital gains tax No capital gains tax is payable on gains made within your SIPP. Inheritance tax If you die before taking pension benefits there is usually no inheritance tax (IHT) payable on assets distributed from the SIPP by way of a lump sum within two years of the date of death. The tax position after you have started drawing pension benefits will depend on how you have chosen to arrange your pension - annuity, unsecured pension (USP) or alternatively secured pension (ASP). The majority of people will leave the benefits to their spouse where no IHT is payable. At i-SIPP we can advise on how to make more beneficial arrangements. Lifetime allowance recovery charge If the value of your pension benefits paid is greater than the lifetime allowance then the excess is subject to a recovery charge. This excess can either be taken  as a cash sum, in which case a recovery charge of 25% will be applied to the excess and the remainder of the excess will be also be subject to income tax at 40% (this is equivalent to a tax of 55% on the excess over the lifetime allowance); or be taken as income, in which case the excess will be subject to a 25% recovery charge and the income will be subject to income tax at the individual’s marginal rate of income tax. The lifetime allowance will increase each year: Tax Year  Lifetime allowance   2006-07  £1.50 million  2007-08  £1.60 million  2008-09  £1.65 million  2009-10  £1.75 million  2010-11  £1.80 million To learn more about the tax advantages of SIPPs call us on 0870 777 0368 Allowances, bases, levels and relief's from taxation are subject to change.