How do you get tax relief ?Confused.

Supercalafragalistic

xylophone wrote: »

You say that you are self employed - you are not in fact employed by your own company?

If not, you need to look to your "relevant earnings" for the purposes of pension tax relief.

See

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/

HMRC define relevant earnings as:

employment income such as pay, wages, bonus, overtime, commission (providing it is chargeable to tax under Section 7(2) ITEPA 2003)

income chargeable under Part 2 ITTOIA 2005, that is income derived from the carrying on or exercise of a trade, profession or vocation (whether individually or as a partner acting personally in a partnership)

patent income, where the individual alone or jointly devised the invention for which the patent in question is granted, in certain specific categories
general earnings from an overseas Crown employment which are subject to tax in accordance with section 28 of ITEPA 2003

rental income is generally not relevant earnings but some rental income may be included if it is in respect of UK or EEA furnished holiday lettings business

Assuming that you are indeed self employed and your rental income does not come within the category above, you could contribute up to £4800 to a SIPP and the provider would claim tax relief of up to £1200 and add it to your pot.

Why 4800 into a sipp please? And thankyou for your detailed explanation

tempus_fugit

Supercalafragalistic wrote: »

Hang on a minute...3k in, but 750 paid on top...thats 25 pc...though basic rate is 20pc?

It's 20% of the total, i.e. £3,750.

Supercalafragalistic

Also in the table shown on this site https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/, it shows, i think what i was trying to say in the first place, that the amount you pay into your pension, will come off your bill irrespective of your level of tax....or have i gone nuts?
Taxable earnings over personal allowance £1000
Less gross contribution nil
Tax due at 20% £200


Taxable earnings over personal allowance £1000
Less gross contribution £200
Tax due at 20 pc £0. (200 saved)


So does this mean if my taxable earnings over pa are 3k, and i put this in a sipp as a gross contribution, i wouldnt pay tax?

xylophone

Why 4800 into a sipp please?

It wouldn't have to be a SIPP - it could be a personal pension or stakeholder.

Your relevant earnings are £6000. You decide that you would like to make the maximum contribution.

In order to achieve £6000 in the pension, you need only actually pay the provider £4800.

For each £80 you have paid, the provider claims £20.

4800/80 = 60.

60 x 20 = 1200.

4800 + 1200 = 6000.

Dazed_and_confused

So does this mean if my taxable earnings over pa are 3k, and i put this in a sipp as a gross contribution, i wouldnt pay tax?

No. Based on the information you have previously posted a relief at source pension contribution into a SIPP or personal pension will not make any difference to your personal tax liability.

You will however get basic rate tax relief added to your pension fund.

So the tax element of your Self Assessment calculation might be say £3,000 but the pension contribution won't change that.

But if you contribute say £3,000 to a relief at source pension then £750 tax relief will be added to the pension fund.

Given your circumstances these are essentially two unrelated things.

Supercalafragalistic

xylophone wrote: »

It wouldn't have to be a SIPP - it could be a personal pension or stakeholder.

Your relevant earnings are £6000. You decide that you would like to make the maximum contribution.

In order to achieve £6000 in the pension, you need only actually pay the provider £4800.

For each £80 you have paid, the provider claims £20.


4800/80 = 60.

60 x 20 = 1200.

4800 + 1200 = 6000.

Thanks xylophone....got it!