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Where Taxpayers and Advisers Meet

Declaring income put directly into pension

jugglingcats
Posts:4
Joined:Wed Apr 07, 2021 10:41 pm
Declaring income put directly into pension

Postby jugglingcats » Thu Oct 07, 2021 4:24 pm

Currently I am PAYE and have not had to do a tax return for 10 years or so as my affairs are so straightforward. I have recently received a small amount of income from freelance work and would like to a) avoid paying tax on this extra income, b) avoid having to complete a tax return!

My hope is that if I transfer the money into my pension I don't have to do a tax return as there is nothing to pay. Is this correct?

robbob
Posts:3146
Joined:Wed Aug 06, 2008 4:01 pm

Re: Declaring income put directly into pension

Postby robbob » Fri Oct 08, 2021 8:59 am

My hope is that if I transfer the money into my pension I don't have to do a tax return as there is nothing to pay. Is this correct?
Nope tax return is mandatory if income exceed 1k - note from "cashflow perspective" you will still have to pay tax on the profits too even if you add into a pension - best you can hope is that you avoid higher rate tax being charged (you do get refunded tax see below)

Ref pension additions if basic rate tax[ayer

Sole trader profit 2k - mandatory 20% tax = £400 - this must be paid whetehr youadd topension or not

If you add cash into a pension directly hmrc add 25% freebie so you only add 1600 cashinto pension hmrc pop in £400 and you have 2k in pension pot.

So you sort of do get the tax paid back in an indirect way if you add to pension but it will need to be paid on your sa return!!

Note there is £1k trading exemption if you income is under 1k no need to register for sa.


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