How much can the Self-Employed put into their Pensions?

Twointhebush

I recently spoke to a financial adviser about starting a pension. I'm self-employed, and he said I could save (in a pension) as much as I earn in any given tax year. But he wasn't sure if I could save my turnover or my profit? Does anybody know?

With thanks,

BoGoF

Your taxable income, ie profit

xylophone

https://www.moneyadviceservice.org.uk/en/articles/pensions-for-the-self-employed

https://www.litrg.org.uk/tax-guides/self-employment/pensions-and-self-employment

Andy_L

if he doesn't know that I'd recommend a different advisor

dunstonh

Are you actually self employed or a director of a limited company? (many people call themselves self employed when they are not and the rules differ).

The financial adviser sounds like an idiot. If they dont know something basic like that then you would have to question what they actually do know. However, if it is an FA rather than an IFA then his knowledge may well be limited to just a handful of products at the bottom end of the market. i.e. more sales based than advice based.

Dazed_and_confused

Assuming you are actually self employed did the advisor explain that unless you are a high earner this won't save you anything off your tax bill.

You will get basic rate tax relief added to your pension payments but for most self employed the payments won't alter how much tax you have to pay through self assessment.

atush

Of course you save on tax. The money put into the pension you get the tax back.

But there is a huge difference between self imployed and a limited company. So which are you?

xylophone

https://www.taxcafe.co.uk/pensionmagic.html

might be worth buying/borrowing.

TheTracker

BoGoF wrote: »

Your taxable income, ie profit

For a limited company, pension contributions are expenses. My understanding is one can agree a remuneration package that has no bearing on operating profit. In other words, paying pension contributions that turn a company from profitable to unprofitable, even to the extent of exceeding revenue or cash at bank (ie go into debt). I suspect you’re getting mixed up with dividends.

BoGoF

TheTracker wrote: »

For a limited company, pension contributions are expenses. My understanding is one can agree a remuneration package that has no bearing on operating profit. In other words, paying pension contributions that turn a company from profitable to unprofitable, even to the extent of exceeding revenue or cash at bank (ie go into debt). I suspect you’re getting mixed up with dividends.

Which would all be irrelevant if the OP is a self-employed sole trader.

Dazed_and_confused

Of course you save on tax. The money put into the pension you get the tax back

That simply isn't true for most self employed and given the op's confusion re turnover and profit I was simply trying to make sure that it is unlikely that a personal pension payment will alter the amount of income tax they have to pay.

The pension fund will be increased by basic rate tax relief but unless they are making a very big profit the payments won't alter his personal income tax position.