Self Assesment Personal Pensions Confusion. Please Advise. Thanks.

NeilJung

Filling in a tax return for the first time for a friend (I used to be SE under the CIS) and got to the "Tailor Your Return" page where a question asks if you have paid into any personal pensions.

The answer is yes, but it's how this does or does not effect the tax calculation in their case that I would like some information on, if any of you knowledgeable people on these matters are feeling charitable.

This person has been paying into a personal pension since becoming self-employed. Tax relief is claimed at source by the pensions provider. The whole amount is on the basic tax relief rate, not even coming close to the 40% band.

Anything that they have paid into the pension has been included in their turnover figure, and not been claimed as an expense. Should this have been dealt with in a different way?

Essentially my question is in what way does this personal pension figure affect their tax calculation (if indeed it does in a relief at source scenario)?

I've been told by an accountant friend that I don't have to put this information on the tax return as it only effects it if you are claiming relief on the 40% band, but reading the return it definitely looks like you should include it, even if it's a formality of sorts.

If it does or doesn't affect tax liability in one way or another though, I hope someone well informed and reliable here can help me just have a better understanding of this brain teaser as I'm having problems working out whether it will effect tax due or not and generally not understanding it despite reading many pages on "how to understand" it. Argh!

Any knowledgable help very much appreciated, and sorry I couldn't be more concise. My understanding of this is not good enough to condense into questions better thought out than these right at this moment. Cheers!

dori2o

It will only affect the tax calculation if your friend has a total taxable income in excess of the 40% tax limit.

If he is a basic rate taxpayer only, and therefore not claiming the relief on his pension contributions, there is no need to complete this section of the tax return.

NeilJung

There is only the "relief at source" of 20%. Even though this won't effect the calculation will HMRC still expect to see the figures for that?

If I don't tick the box "yes" when it asks "Did you pay into a personal pension plan", then that would be at the least innacurate surely, even if I know the figures are not going to effect the tax due?

I'm going to have a dummy run through the form and enter in the figures and see what it spits out, and if it looks wrong seek more information.

Still open to any other insights or information on this if anyone has the time to try and make things clearer. Thanks.