Personal pension for someone close to tax free personal allowance

glasgowdan

Asking around for a relative who's trying to do some planning - is a personal pension worthwhile for a self employed person whose net earnings are only a little above the tax allowance? (around £13500)?

Will the 20% tax allowance on the pension be added to the pot regardless of whether the person pays much tax in a year or not?

I don't know if I'm even asking the right question... just thought I'd try and learn a little first!

atush

Yes, you can get BR tax relief- even if you earn nothing (you can put 2880 into a pension, and the govt will add TR to make it 3600 even if you have zero earnings).

So yes, it doesnt matter about how much tax you pay, you can put in up to your entire salary (net) into a pension (up to 40K ie 32K)

xylophone

The relative's total relevant earnings are (gross) £13,500?

He can contribute up to £10,800 into a personal pension and the provider will claim tax relief of up to £2,700 and add it to the pension.