Trading losses (individual) + Pension Contribution

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Hi guy

I have a client who has trading losses as a sole trading (proper trading business, plus he works on earns. Say he earns £50k and also have trading losses of £50k. Can offset the losses in this tax year and still pay £50k gross pension contribution and still get tax relief. It looks like net relevant earnings do not factor in trading losses? Can anyone clarify?

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paddle steamer
By DJKL
29th Mar 2017 21:39

This article covers, though the writer himself appears to have some reservations.

https://www.taxation.co.uk/Articles/2012/12/12/297321/pensions-and-losses

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Replying to DJKL:
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By taxiboy
29th Mar 2017 21:49

I've read that too.......what are your own personal thoughts...does it work?

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paddle steamer
By DJKL
30th Mar 2017 09:52

I am like the writer (except he is more knowledgeable), I also have reservations, I am afraid I am not going to provide you anything more meaningful than you have.

I certainly would in the past have been in the camp that losses reduce nre (probably an age thing), but he makes the point that the 2006 changes drop this approach by the definitions (step 1 and step2) and his construction of the act leads him to the view that sideways losses do not reduce nre.

I suspect you want one of the posters on here who enjoys the minutiae of delving through the Acts themselves, I am more a commentary sort of person and my attempts to interpret legislation often as not prove incorrect.

It is an interesting question and I am curious to see more learned responses.

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Replying to DJKL:
paddle steamer
By DJKL
30th Mar 2017 10:07

Having now read the Act I do now believe the sideways losses are to be ignored when calculating "Relevant UK Earnings " (not nre as I said)

There is a degree of sense in the approach, were the losses sideways offset against say rental income you would not think about it, rental income not being "R UK E" it is only because we have an offset against say employment income, that would be "R UK E" that qualms arise.

Also see Nichola Ross Martin at foot of page here:

http://www.rossmartin.co.uk/private-client-a-estate-planning/income-loss...

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By AlgernonB
30th Mar 2017 11:35

Why would he want to wipe out all of his Sch E earnings with losses, and waste his personal allowances, currently £11,000? Or does he have substantial other income?

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