Pension contributions as sole trader earning 100k+

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As a sole trader earning approx 107k after expenses, can pension contributions have any affect on the loss of personal allowance over 100k? As I understand it, there is a 20% tax relief that the personal pension provider claims from the government and then as a higher rate tax payer an additional 20% can be claimed back from HMRC via self assessment. I want to understand if this has any bearings on the loss of personal allowance after 100k which is essentially a 60% tax rather than 40%. I know that for employees the pension contributions are subtracted from their taxable income and this is how they can avoid that 60% with pension contributions. How does this work for sole traders? Thank you. 

Replies (19)

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By the_drookit_dug
03rd Apr 2024 23:28

Yes, personal pension contributions can be used to reduce taxable income to below £100k.

Just Google it and you'll find plenty of worked examples. Better get your skates on though, only 2 days left of the tax year...

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Replying to the_drookit_dug:
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By Ellieall
04th Apr 2024 00:01

Thank you that's helpful to hear. I have already contributed 10k to my personal pension. I was basically just looking for confirmation this would work to prevent being taxed 60% on that 7k as I could only find examples talking about higher rate earners 40% but not the loss of personal allowance.

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Replying to Ellieall:
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By Paul Crowley
04th Apr 2024 09:51

.

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Replying to the_drookit_dug:
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By Not Anonymous
04th Apr 2024 11:25

the_drookit_dug wrote:

Yes, personal pension contributions can be used to reduce taxable income to below £100k.

Just Google it and you'll find plenty of worked examples. Better get your skates on though, only 2 days left of the tax year...

The op would be making relief at source contributions and those do not change your taxable income.

They do reduce your adjusted net income though and that is what the Personal Allowance is based on.

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Replying to Not Anonymous:
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By the_drookit_dug
04th Apr 2024 20:55

Aye, I had considered more precise wording but figured OP wouldn't be that fussed about me loosely referring to adjusted net income as taxable income.

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Replying to the_drookit_dug:
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By D V Fields
05th Apr 2024 11:44

For added complexities some pension providers have an earlier cut off day for applying to the current year. Not sure how the argument would go with HMRC in such cases but easily avoidable.

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DougScott
By Dougscott
04th Apr 2024 08:38

And as is frequently said on this forum a decent accountant should be telling you all this stuff and minimising tax on your earnings.

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By Truthsayer
04th Apr 2024 10:42

As a sole trader earning approx 107k after expenses, you should use a fraction of those profits to pay for an accountant's advice.

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Replying to Truthsayer:
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By Ellieall
04th Apr 2024 11:40

I work in the adult industry and had a very negative/ awkward experience with an accountant in the past which makes me feel apprehensive, however I do plan to for the next tax year now that my income has increased.

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Replying to Ellieall:
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By Leywood
04th Apr 2024 13:03

Ellieall wrote:

I work in the adult industry and had a very negative/ awkward experience with an accountant in the past which makes me feel apprehensive, however I do plan to for the next tax year now that my income has increased.

Yet you are on here, asking a bunch of Accountants for free advice.

Disrespectful and inappropriate.

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Replying to Leywood:
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By Ellieall
04th Apr 2024 13:47

Well it is very different having direct personal contact with someone over online. There does not appear to be rules against individuals asking questions on this forum and no one is obligated to respond in the slightest. Grateful for those that have.

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Replying to Ellieall:
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By Leywood
04th Apr 2024 14:09

You clearly haven’t read the rules.

That said just because you’ve had a bad experience with an accountant doesn’t mean you shouldn’t shop around for another one.

There are plenty of accountants who deal with folk in your industry. Some have commented on here in the past. I’m sure you will find someone helpful for next year.

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Replying to Leywood:
By JCresswellTax
11th Apr 2024 10:47

Leywood wrote:

There are plenty of accountants who deal with folk in your industry. Some have commented on here in the past. I’m sure you will find someone helpful for next year.

I'm planning to specialise in it!

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Replying to Leywood:
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By Dmcacompliance
11th Apr 2024 10:40

There are a bunch of accountants on here asking accountants for free advice...

When one is looking for respect it's a good idea to start by being respectful.

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Replying to Dmcacompliance:
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By Leywood
11th Apr 2024 12:48

What do you not get, this site is for Accountants.

Wow, youve been on here since 2014 and this is your first comment!

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Replying to Dmcacompliance:
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By Paul Crowley
11th Apr 2024 13:06

'There are a bunch of accountants on here asking accountants for free advice...'
That is exactly what the site is for. Accountants to chat with each other

You really do not get it?
Is this the right place for you?

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Replying to Ellieall:
DougScott
By Dougscott
04th Apr 2024 13:11

Ellieall wrote:

I work in the adult industry and had a very negative/ awkward experience with an accountant in the past which makes me feel apprehensive, however I do plan to for the next tax year now that my income has increased.

Best to go by personal recommendations from one of your colleagues or employers for an accountant. An accountant who knows your industry well should be able to maximise your expense claims and ensure you pay the right amount of tax.

You do get a lot of nerdy accountants who can't cope with anything too risque.

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Replying to Dougscott:
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By Ellieall
05th Apr 2024 00:44

Thank you, I will definitely seek some personal recommendations. Unfortunately my experience was less about them being prudish and more about them becoming invasive/ inappropriate. It was a slightly scary experience as my privacy and separation between my personal info and professional work is paramount. Naturally that had made me apprehensive about seeking another accountant and I've been trying to learn as much as I can myself the past few years but now my earnings have increased I definitely want to hire an expert.

I do realise I was just unlucky and there are a lot of very decent and professional accountants who will work with people in my field.

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Replying to Ellieall:
By ireallyshouldknowthisbut
04th Apr 2024 20:27

Ellieall wrote:

I work in the adult industry and had a very negative/ awkward experience with an accountant in the past which makes me feel apprehensive, however I do plan to for the next tax year now that my income has increased.

You just need to hire a grown up. Assuming you are in contact with others in your industry you should ask around to see who they use. I dont doubt some firms do a larger number of these types of returns but quietly rather than putting it on their website as a specialism.

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