Self Employed - personal pension

paul_62

I've been reading and searching for a few hours and not found an answer to this and i know theirs a vast pot of knowladge out their, i also appologise for not getting the termanology correct.

How much can i pay into a pension plan / fund before i have to pay tax on it. I've been told by non accountants its up to £200 per month, seems strange as its not realy a buisness expense.

Idealy I should have an accountant and they'd answer this - I will get round to sorting one out.

mrkbrrws

£235,000 :rotfl:

BoGoF

I'm not entirely sure what you mean to be honest. Depending on the leavel of your profits you can pay as much as you like into a pension plan, even people with no employment/self employment can pay £3600 a year into a personal pension plan and obtain tax relief.

You will only ever pay tax when you actually take your pension at retirement age and then that will depend on how much pension you have built up and the tax free allowance at the time.

Can you clarify what you mean ?

paul_62

as we all know what ever profit i make in a month i pay tax on, i've been told that i can pay up to £200 into a pension and not pay tax on that amount.

BoGoF

So do you mean if you pay £200 a month pension payment then that is an extra £200 income you don't have to pay tax on ? If that's the advice you've been given then that is wrong.

Only way you will pay less tax is if you are liable to tax at 40% and make pension contributions....and then the tax saving would be your gross premium at 20%.

mrkbrrws

Sorry I didn't have time for a full answer earlier. :rotfl:

First, you can pay whatever you want into a pension.

You get tax relief on the higher of £3,600 and your earnings each tax year.

So if you want to put £200 into your pension you actually pay £160 and HMRC will pay in £40. This gives you relief for the basic rate tax, the higher rate relief has to be claimed. Note that even if you don't pay any tax you still get 20% tax relief.

If you contribute more than £235,000 per year there is a tax charge.