Making additional SIPP contribution before end of tax year, as a self employed low earner

Dazed_and_C0nfused

AspiringPensioner said:

Hello again - just a follow up question. 

Do I get the tax relief on my contributions if I'm under the personal allowance threshold and don't pay any income tax on my self-employed earnings?

As in the example discussed above, if my self employed turnover was £12k and profit before tax was £9k, therefore I'm permitted to contribute a maximum of £9k into my personal pension in this tax year - but do I get tax relief on that entire amount? My other half is asking how it can be possible to get tax relief on this, if I'm not paying any income tax in the same year. I didn't ask that question directly in my OP, but I did mention that this is my main motivation for putting a larger amount into my pension rather than into a savings account. 

A while ago I found the following info on the Moneyhelper.org website:

You can get tax relief on your pension savings up to the lower of the annual allowance, which is currently £60,000 for most people, or 100% of your earnings. If you exceed your allowance, a tax charge is made which claws back any tax relief that was given at source. If you earn less than £3,600, you can contribute up to £2,880 to a personal pension and still get tax relief.

But I guess this doesn't explicitly lay out that the "100% of your earnings" applies to those who earn above £3,600 but below the personal allowance. Thanks for your patience and for any further insight!

Yes, you can get pension tax relief even if you don't pay any tax.

Using your figures you would pay £7,200 and the pension company would add £1,800 basic rate tax relief (courtesy of HMRC).

£1,800 being 20% of the gross contribution of £9,000.

You have to show this on your Self Assessment return but it won't change your income tax liability.  Which if you have no other taxable income will be £0.00

AspiringPensioner

Dazed_and_C0nfused said:

Yes, you can get pension tax relief even if you don't pay any tax.

Using your figures you would pay £7,200 and the pension company would add £1,800 basic rate tax relief (courtesy of HMRC).

£1,800 being 20% of the gross contribution of £9,000.

You have to show this on your Self Assessment return but it won't change your income tax liability.  Which if you have no other taxable income will be £0.00

Thanks D and C!

So, given that I've been putting in £50 a month via DD over the year, I need to take that into account too, right? Those monthly contributions I've already made (£50 net = £60 gross, x 12 months) equates to £720 that I need to deduct from the £9,000 permitted, leaving me £8,280 gross, or £6,624 that I can pay in? 

Dazed_and_C0nfused

AspiringPensioner said:

Dazed_and_C0nfused said:

Yes, you can get pension tax relief even if you don't pay any tax.

Using your figures you would pay £7,200 and the pension company would add £1,800 basic rate tax relief (courtesy of HMRC).

£1,800 being 20% of the gross contribution of £9,000.

You have to show this on your Self Assessment return but it won't change your income tax liability.  Which if you have no other taxable income will be £0.00

Thanks D and C!

So, given that I've been putting in £50 a month via DD over the year, I need to take that into account too, right? Those monthly contributions I've already made (£50 net = £60 gross, x 12 months) equates to £720 that I need to deduct from the £9,000 permitted, leaving me £8,280 gross, or £6,624 that I can pay in? 

Your maths has gone a bit awry there.

If you have been paying £50/month then you should have been getting £12.50/month in tax relief, a gross contribution of £62.50.  20% of which is £12.50.

But the principle is correct, you would need to take those contributions into account when calculating how much extra you can pay in this tax year.

If your profit is £9,000 and you have already contributed £750 that leaves a further £8,250 (gross) that you can contribute.

Which would be you paying £6,600.

AspiringPensioner

Dazed_and_C0nfused said:

Your maths has gone a bit awry there.

If you have been paying £50/month then you should have been getting £12.50/month in tax relief, a gross contribution of £62.50.  20% of which is £12.50.

But the principle is correct, you would need to take those contributions into account when calculating how much extra you can pay in this tax year.

If your profit is £9,000 and you have already contributed £750 that leaves a further £8,250 (gross) that you can contribute.

Which would be you paying £6,600.

Ha ha, I had a feeling I was calculating the 20% in the wrong direction, esp as I should have just checked on how much I've been getting in tax relief to date. Thanks for that and for all the info.