Why does a pension contribution not reduce my tax?

[billyg]

Hi , I am a sole trader, if I enter that I contribute to a pension on the self assessment form it is not reducing the amount of tax that I need to pay this year.

I thought that is how it worked, is that not how it should work?

[someone]

It only reduces the tax you pay if you're a higher rate taxpayer.

The pension company reclaims any basic rate tax you paid so you need to pay it to HMRC.

Employees sometimes pay in direct from untaxed income, then it does reduce the tax paid to HMRC, but it also reduces the tax reclaimed from HMRC by the pension company so that the same amount ends up in the pension.

[billyg]

Thanks so much for clarifying that.