Help! S&S Lifetime LISA, or S&S ISA or Mortgage overpayments!

NoMore

LISA doesn't receive Tax relief, its merely a 25% bonus from the government, it just so happens to be the same amount as basic tax relief within a pension. So a LISA would not affect your income tax payment.

Albermarle

MX5huggy said:

No! 

The LISA money doesn’t even get mentioned to HMRC, you pay tax on it then the government top ups the LISA account. 

The pension money also doesn’t effect your tax bill (unless you’re a higher rate tax payer). You pay the money into the pension and again the government adds 25% so you need to decide if you want to pay in £4800 that becomes £6000 or £6000 that becomes £7500. But I’m fairly sure there is a pension contributions box on the SA form. 

You’re self employed and accountant may work through that you should benefit from being a limited company then the company can make pension contributions avoiding corporate tax income tax and National insurance. 

While I agree with not focusing on mortgage, your current LTV, outstanding term on any fix etc would influence that discussion. 

If you have to fill in a tax return, then you have to put in the gross pension contributions in the right box. Although as you say it may well not affect your tax position, you still have to fill it in.
If you do not have to fill in a tax return, then no need to mention any pension contributions to HMRC, unless you want to claim higher rate tax relief. Even then not necessary to fill in a return to do this.

Sam3007

MX5huggy said:

You’re self employed and accountant may work through that you should benefit from being a limited company then the company can make pension contributions avoiding corporate tax income tax and National insurance. 

Thanks for bringing this up as I have never considered this before, but could you please let me know how I might be better off switching to a limited company (Director) with no employee in such a scenario:
Sole trader
Gross income: 35K - expected to increase.
Net income: 29K
Total tax due and NIC for self assessment around: £5500 

Thanks

MX5huggy

Here’s a general guide - https://www.accountspoint.co.uk/resources/blog/advantages-of-a-limited-company-structure/

pensions aren’t mentioned but if the company makes contributions then they reduce the company profits. 

Bimbly

Also https://www.unbiased.co.uk/life/small-business/contributing-to-your-pension-via-a-limited-company-explained