UC self employed pension payments

kazzyb123

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

Dazed_and_C0nfused

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

No idea about UC but you have completely misunderstood as far as income tax/Self Assessment is concerned.

You cannot claim pension contributions as a business expense.  You show the payments in the pension contribution part of your tax return 

You will no doubt be contributing using the relief at source (RAS) method.  For most people these contributions don't save you any income tax*.  But you do benefit from pension tax relief being added to your contribution.  So each £1 you contribute becomes £1.25 in your pension fund.

*If you are liable to higher rate tax they will save you some tax and the same if you are Scottish resident and liable to the intermediate rate (21%).

NedS

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

When reporting your S/E income and expenses each month on UC, there is a question and place to specifically enter the amounts paid in that month for Tax, NI and Pension contributions, so you should enter the net amount you have paid into a pension scheme from your self employed earnings in that box. You must only report Tax and NI amounts you have actually made payments to HMRC for in that month. For most people who pay their tax bill annually, this would be done once per year, and for 11 months the amount entered would be zero if no payments to HMRC have been made.

Tax, NI and pension conts should not then be deducted under other expenses as well, or they will be deducted twice. Check the summary page carefully at the end before hitting the big green submit button.

Self assessment (and tax) questions are a separate issue and are dealt with by HMRC, not DWP who administer UC. Obviously any data you report monthly to UC should match what you declare to HMRC at the end of the tax year.

kazzyb123

Dazed_and_C0nfused said:

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

No idea about UC but you have completely misunderstood as far as income tax/Self Assessment is concerned.

You cannot claim pension contributions as a business expense.  You show the payments in the pension contribution part of your tax return 

You will no doubt be contributing using the relief at source (RAS) method.  For most people these contributions don't save you any income tax*.  But you do benefit from pension tax relief being added to your contribution.  So each £1 you contribute becomes £1.25 in your pension fund.

*If you are liable to higher rate tax they will save you some tax and the same if you are Scottish resident and liable to the intermediate rate (21%).

Yes, I definitely have misunderstood it all, it’s my partner who is self employed so I have never looked at any of this ni he has some reading to do, thanks

kazzyb123

NedS said:

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

When reporting your S/E income and expenses each month on UC, there is a question and place to specifically enter the amounts paid in that month for Tax, NI and Pension contributions, so you should enter the net amount you have paid into a pension scheme from your self employed earnings in that box. You must only report Tax and NI amounts you have actually made payments to HMRC for in that month. For most people who pay their tax bill annually, this would be done once per year, and for 11 months the amount entered would be zero if no payments to HMRC have been made.

Tax, NI and pension conts should not then be deducted under other expenses as well, or they will be deducted twice. Check the summary page carefully at the end before hitting the big green submit button.

Self assessment (and tax) questions are a separate issue and are dealt with by HMRC, not DWP who administer UC. Obviously any data you report monthly to UC should match what you declare to HMRC at the end of the tax year.

Thanks for the reply. I thought that tax/NI payments could be kept in a separate account ready for when it is needed at the end of the year

Dazed_and_C0nfused

kazzyb123 said:

NedS said:

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

When reporting your S/E income and expenses each month on UC, there is a question and place to specifically enter the amounts paid in that month for Tax, NI and Pension contributions, so you should enter the net amount you have paid into a pension scheme from your self employed earnings in that box. You must only report Tax and NI amounts you have actually made payments to HMRC for in that month. For most people who pay their tax bill annually, this would be done once per year, and for 11 months the amount entered would be zero if no payments to HMRC have been made.

Tax, NI and pension conts should not then be deducted under other expenses as well, or they will be deducted twice. Check the summary page carefully at the end before hitting the big green submit button.

Self assessment (and tax) questions are a separate issue and are dealt with by HMRC, not DWP who administer UC. Obviously any data you report monthly to UC should match what you declare to HMRC at the end of the tax year.

Thanks for the reply. I thought that tax/NI payments could be kept in a separate account ready for when it is needed at the end of the year

They can be.

kazzyb123

Dazed_and_C0nfused said:

kazzyb123 said:

NedS said:

kazzyb123 said:

Hi, 

Do I add Pension payments under expenses when reporting self employed income at the end of the month? 

In the longer term if anyone knows is it right that money paid into a pension now is deducted as an expense for self assessment therefore no tax paid on it and if it is withdrawn when no longer working and the final amount is under the tax free allowance no tax would ever be paid on it? 

I’m sure that’s probably completely wrong, am yet to understand pensions,

thanks.

When reporting your S/E income and expenses each month on UC, there is a question and place to specifically enter the amounts paid in that month for Tax, NI and Pension contributions, so you should enter the net amount you have paid into a pension scheme from your self employed earnings in that box. You must only report Tax and NI amounts you have actually made payments to HMRC for in that month. For most people who pay their tax bill annually, this would be done once per year, and for 11 months the amount entered would be zero if no payments to HMRC have been made.

Tax, NI and pension conts should not then be deducted under other expenses as well, or they will be deducted twice. Check the summary page carefully at the end before hitting the big green submit button.

Self assessment (and tax) questions are a separate issue and are dealt with by HMRC, not DWP who administer UC. Obviously any data you report monthly to UC should match what you declare to HMRC at the end of the tax year.

Thanks for the reply. I thought that tax/NI payments could be kept in a separate account ready for when it is needed at the end of the year

They can be.

So if we keep money in a separate account do I put it through on the UC end of month thing as tax or income or is it capital? Thanks sorry if I’m not getting it my brain hurts!