Self-employed pension

Dazed_and_C0nfused

It is tax relief.

Regular posters on here will all have their own way of referring to things but I agree with Marcon on this one.

Your wife can make a maximum contribution that is equal to her taxable profit.

She pays the pension company 80% of that amount and the pension company, courtesy of HMRC, adds the basic rate tax relief.

Not being a taxpayer does not alter that.

Non earners are limited to contributing £3,600.  £2,880 from the individual plus £720 basic rate tax relief.

Brenster

dunstonh said:

Marcon said:

dunstonh said:

Marcon said:

dunstonh said:

Is she able to pay her full income into the pension, and get it topped up with the HMRC's 25% contribution?

Pensions do not get a top-up. Tax relief is a reduction in cost.    It is important to remember that when dealing with HMRC.  And that is where you have made the mistake.

How about all the threads on this board where people without earnings and not paying tax are eagerly advised to pay £2,880 into a personal pension and get a top up (which is surely what it is and how most normal people view/describe it) to £3,600?

How about them?    Just because sometimes people describe it like that does not make it right.   It is safer to work it out the HMRC way and the way its been since 1988.  That way you avoid the mistake of paying in too much.

A £3600 pension contribution costs £2880 as it gets 20% relief.  it does not get a 25% bonus.

Get real. Those threads show time and again how real people view the world - and if you're a non-taxpayer, pompously being told to 'work it out the HMRC way' will only serve to confuse.

These threads show time and again how people get it wrong when they have seen tax relief referred to as a 25% bonus.    Just as the OP has here.   Is it not rather pompous to say that you shouldn't work it out how HMRC do it?
I suppose you are going to say that higher rate or additional rate tax payers get a bonus as well.

I have described it as a top up, as that is how most see it, we work hard and pay our taxes, we see the NET amount we take home, we then save some of that and put it into our pension, which is where the government give us back our tax on that amount, i see that as a top up as do most people.  You can describe it whatever way you like, but at the end of the day the result is still the same.

dunstonh

Brenster said:

dunstonh said:

Marcon said:

dunstonh said:

Marcon said:

dunstonh said:

Is she able to pay her full income into the pension, and get it topped up with the HMRC's 25% contribution?

Pensions do not get a top-up. Tax relief is a reduction in cost.    It is important to remember that when dealing with HMRC.  And that is where you have made the mistake.

How about all the threads on this board where people without earnings and not paying tax are eagerly advised to pay £2,880 into a personal pension and get a top up (which is surely what it is and how most normal people view/describe it) to £3,600?

How about them?    Just because sometimes people describe it like that does not make it right.   It is safer to work it out the HMRC way and the way its been since 1988.  That way you avoid the mistake of paying in too much.

A £3600 pension contribution costs £2880 as it gets 20% relief.  it does not get a 25% bonus.

Get real. Those threads show time and again how real people view the world - and if you're a non-taxpayer, pompously being told to 'work it out the HMRC way' will only serve to confuse.

These threads show time and again how people get it wrong when they have seen tax relief referred to as a 25% bonus.    Just as the OP has here.   Is it not rather pompous to say that you shouldn't work it out how HMRC do it?
I suppose you are going to say that higher rate or additional rate tax payers get a bonus as well.

I have described it as a top up, as that is how most see it, we work hard and pay our taxes, we see the NET amount we take home, we then save some of that and put it into our pension, which is where the government give us back our tax on that amount, i see that as a top up as do most people.  You can describe it whatever way you like, but at the end of the day the result is still the same.

So, how does the "bonus" description work with higher rate relief or additional rate relief?      

I disagree that most see it as a bonus.   This is only a more recent development due to dumbing down on some websites after some newer providers stopped pre-funding the relief.  It has always been an issue that some have difficulty understanding though.   

You can call the relief "chocolate" for all I care.   However, if you start calling it something that it is not and then make mistakes because of that misunderstanding then it makes sense to be told what it actually is and how it works.       I am surprised that it is considered wrong to be told the correct information. 

The OP said: "Is she able to pay her full income into the pension, and get it topped up with the HMRC's 25% contribution?". They had the sense to check it first but we have seen people post that have paid the money in and exceeded the limit.   You cannot make that mistake if you treat the tax relief as tax relief.

Screaming_Flamingo

Dazed_and_C0nfused said:

It is tax relief.

Regular posters on here will all have their own way of referring to things but I agree with Marcon on this one.

Fine. My point is not that it isn't technically called tax relief. My point is more that it is confusing terminology for people who don't pay tax. Why would a non-tax payer ever google "tax relief" to find out how to improve their finances? 

Also, for the benefit of lurkers or others who discover this thread in the future, I found a very useful answer to my OP question here. 

https://www.which.co.uk/money/pensions-and-retirement/personal-pensions/contributing-to-a-private-pension-explained/tax-relief-on-pension-contributions-explained-a27f53z7qg3f