Self-employed - your pension funds could get a boost!

Published: 06/03/2023 By Hannah McCormack

Could you be one of the lucky self-employed who could boost their pension funding from April this year?

HMRC announced self-employed profits are to become aligned with the tax year from April 2024. In order to facilitate this change there will be a transitional year starting in April 23. This could mean some end up with a higher than anticipated pensionable income within this transitional period.
 
The inflated earnings within this year could provide a chance to make a larger pension contribution as well countering higher tax bills by using carry forward. Carry forward allows for the use of annual allowance that has not been used during the 3 previous tax years, provided you were already part of a pension scheme during that period. Business owners are able to make employer pension contributions whereas the self-employed can only make personal contributions based on their UK relevant earnings. With this figure being higher in the transitional period it gives the potential to make the additional pension contribution. Not only that, these additional earnings will not count towards the thresholds for the tapered annual allowance ensuring no loss in personal allowance or child benefit.

For some, paying an additional pension contribution could potentially reverse an existing tapering of the annual allowance as it would reduce the threshold income to below £200,000.

Not only this the reduction in additional rate threshold to £125,140 from £150,000 from April 23 could also aid in maximising pension contributions.

Unfortunately, if your accounts are already aligned with the tax year there will be no scope to gain in this regards but we always recommend giving us a call to see what we can do to boost your pension. Call us on 020 8661 7878 for a friendly, no obligation chat with our expert pension advisor Martin Card, or book an appointment by emailing advice@turpinba.co.uk 

To find out what is changing from HMRC read the proposed changes on the gov website here