Self employed pension query

Mick70

How much , a self employed person,  pay into a pension ?  

If last years tax return shows gross income £10, allowable business expenses (£4), net profit £6 (nil tax due only NI) .  Does that mean they can pay £10 into their pension or is it the £6 , I’m confused ,
Thank you ,
Mick 

Dazed_and_C0nfused

Neither.  It's £3,600.

Mick70

Don’t understand ?

Albermarle

It means if you are literally earning just £10 , then you can take advantage of the tax relief allowance for very low/non earners.
Probably best to make your example more realistic, multiply the figures by 30 maybe .

xylophone

If you have no "relevant earnings" or relevant earnings under £3,600 per annum, you can contribute a net £2880 to a SIPP/personal pension/stakeholder and the provider will claim tax relief of £720 and add it to the pension.

Mick70

!!!!!! , sorry ! I meant £10k gross income , allowable expenses of (4K), net profit of £6k  (hence no tax to pay only NI).

Does it mean you can only pay 6k into your pension or can you pay in 10k ?

Dazed_and_C0nfused

£6k gross if no other pensionable earnings.

xylophone

 See below (and bear in mind that  her profit is taxable - it is just that as it falls within her Personal Allowance, it is taxable at 0%).
Thus, a person's total income might be relevant earnings of £12,000 - he would pay no tax - nevertheless he could contribute £9,600 to a SIPP/PP/stakeholder and the pension provider would claim £2,400 and add it to the pension.
 https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/
For self-employed individuals, their relevant earnings are profits calculated over their chosen period of account.  This does not need to align with the tax year ie 6th April to 5th April. We’ll cover this in detail later.

Period of Account vs relevant earnings

Although it’s possible to have a period of account that runs for less, or more, than 12 months and to change the year end date if required, it is common for it to run for 12 months, eg 1st April to 31st March, or 1st January to 31st December. Apart from special rules for the opening years and when the accounting date is changed, once the amount of profit is known, it’s assessed for tax in the tax year in which the accounting period ends.  So profits for a period from 1 April 2019 to 31 March 2020 will be assessed against the tax rates applicable for tax year 2019/20. The amount of taxable profit is the relevant earnings figure to support pension contributions paid in the 2019/20 tax year (ie between 6th April 2019 and 5 April 2020).