Pension Annual Allowance info.

JRHARTLEY

Hi I have abit of a long winded question about tax relief.
I'm just after abit of clarification on my pension contributions and hope you can help.

I'm a basic tax rate paying self employed (sole trader)gardener.
I opened a defined contribution pension scheme in Feb 2017 and these are my profits and contributions to my pension.

16-17 £23000 Profit. Paid £400.00 into pension
17-18 £27000 Profit. Paid £9250.00 into pension
18-19 Estimated profit £22000. Paid into pension £12250.00


BUT I wish to by a commercial truck before the end of this tax year (paid in one go) which is say around £18000-£20000 and 100% tax deductable.
This would drastically wipe my proft out for this year way below what I have already paid into a pension.
Would I have an annual allowance tax charge because I have paid more into my pension than I have in profit for this year or would the unused allowance from the previous years count towards how much I can put in and so would'nt be charged.
Many Thanks!

AlanP_2

You would typically depreciate the truck as an asset over say 3 or 5 years with the annual depreciation going against your profit, how you fund it is irrelevant.

So if 20K and you depreciated over 5 years that would be 4k expense against estimated profit of 22k reducing profit to 18k.

Do you have an accountant, what's their view?

BoGoF

How much have you paid into your pension this year?

As above not sure if the truck would be due 100% deduction.

BoGoF

Just read your post again and you say yiu have paid £12,250. Even if you can claim 100% deduction you wouldn't want to as you woukd be losing your personal allowance - you would normally restrict any capital allowances claimed in this situation so that your taxable income is equal to personal allowance.
I would suggest you restrict your claim so your taxable income is the same as your pension contributions.

Carry forward does not help you here.

zagfles

Forget about the annual allowance, that's not your issue. You're way below it.

Your issue is that you might have paid in over 100% of your relevant earnings this year, and you can only get tax relief on 100% (note this has NOTHING WHATSOEVER to do with the annual allowance).

But if that happens, you can ask for a refund of the excess contributions, and you can do that after the end of the tax year (think you have about 6 years to request the refund).

JRHARTLEY

Thanks for the fast reply guys its much appreciated .That makes it alot clearer on how the process works.
I do have actually have an accountant now for this years tax return but im not seeing him till next week and this has put my mind at ease...you've made it very understandable.

Cheers!