really comfused..TAX..NI...Carers Allowance..Pension Contributions! help!

kemo_2002

:Please can anyone shed some light, in a nut shell:

i recieve carers allowance @ £3039.40 pa
i am self employed after all expenses net profit is £4990 pa

total £8041 -as i am just under my allowance i dont pay tax or NI ( i get ni contributions through my carers allowance)

with carers you are able to earn 100 per week, and can deduct 50% of pension contributions so technically i can earn for example £150 per week if i put £100 in a pension.

my problem comes is if i earn the extra to put away into a pension,am i right in saying pension contributiond id NOT an allowable expense for self employed,therefore if not, it would take me over the limit for my personal allowance and i would be liable for both tax and n&i, this then means that an increase wage i wouldhave to tell child tax credit.

to round up ive put the figures in, and if i earned an extra £200 to put into a pension, yes i would keep my cares allowance, but i would 'lose' rpughly £40 paying tax and would lose £120 in tax credits,sp really i would have gained £40 not £200....

im all for working ( iw uodlnt have started my buisness otherwise) but is there anyway around this, i dont mind paying tax,but £40 for £200 worth of work, it just isnt worth it.

sorry for waffling, the reason i am asking this is i am keen to expand my business, but i am holding fire, because as mentioned above, there is no way i would do double the work for nothing.

anyone any tips, advise, or is it just a case of tough, you work double for nothing extra or leave thing as they are .

thanks guys

Pennywise

If you put £200 into a pension, it's deemed net of tax and the govt top it up with another £50 so £250 goes into your pension.

Pension payments are deducted for tax credit purposes, so you shouldn't lose so much in tax credit reductions.

Overall, you won't benefit by just £40 for earning £200 more. There's the extra £50 into the pension, which increases it to £90 and you won't lose quite so much tax credits.

kemo_2002

Pennywise wrote: »

If you put £200 into a pension, it's deemed net of tax and the govt top it up with another £50 so £250 goes into your pension.

Pension payments are deducted for tax credit purposes, so you shouldn't lose so much in tax credit reductions.

Overall, you won't benefit by just £40 for earning £200 more. There's the extra £50 into the pension, which increases it to £90 and you won't lose quite so much tax credits.

Thankyou, i didnt realise i could minus any payments to a pension on the tax credits form,that makes things alot more worth while, ami right in saying however, it is NOT deducted on your self assesment, therefor i would be liable to pay tax at 20% on anything over my personal allowance, is this also the case for NI?

i suppose what i am really asking is if i pay £2000 into my pension pot p/a do i include this as 'gross' on my tax return (therefore pay 20% tax on this contribution)

or do i deduct hte £2000 from my 'gross' therefore not paying 20% tax on my contribution.

I am a little comfused, do i pay tax (£400), and then get it added to my pot in terms of relief (goverment adds £400 to my £2000 contribution?)

I am a little worried if i do pay tax on the gross amount (including the 2kpension contribution) as this 2k extra gross will mean i am over my personal allowance so i will lose all my tax free savings wont i?