Pension for earnings below personal tax allowance

[Duchessofmuchness]

DD has been working in a freelance position since Nov. This tax year she will earn less than personal allowance, so no tax expected when she does self assessment. Next tax year she would earn more than personal allowance.

if she invested £1000 in a personal pension this year, as she wouldn’t have paid tax on it, would she still benefit from the 25% gross up? ( next year as a tax payer if she put in £1000 would gross up to &1250)

TIA

I think you can have 3600 (split between your earnings and a government top up) a year onto a pension with zero earnings. So I'm sure it's possible. Dont know how tho.

Given how close we are to the new tax year, can she just add a bit more every month from April, and forget about this year?

Thanks for the reply. Sorry my question is different. I know she can put money into a pension, my question is that since she didn’t pay tax on the money she is putting in does she still benefit from the 25% gross up. TBH it seems like she shouldn’t/wouldn’t but I can’t find an answer online.

Yes, if paid into a relief at source pension (most private pensions/ SIPPs are) she'll get the tax top up.

As far as I know, yes you can - you can put £2880 in to a pension each year even if you have no earnings and the government tops it up to £3600. I do it via a SIPP and the provider does the admin for the government top up.

www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Brilliant thanks so much.

Also trying to research what best option for her be. She is 24, in her first job working freelance for a start up. She might end up employed by them if they grow or with another firm over next year or so. It’s not her intention to be long term self emotes, so at some point she’d probably end up in an employer scheme.

So she needs something for next year or so. She isn’t financially experienced or knowledgeable enough to manage a SIPP and be able to make decisions. So either a stakeholder pension with Aviva or Standard Life seems like an option or a LISA?

SIPP is cheaper, she can just put it into a tracker (which is what L&G etc would do too). LISA is a different question - listen to Martin Lewis on them.

It doesn't sound like a freelance position btw, she sounds like she's actually an employee.

@Negroany thanks - will take a look at that SIPP option. Yes have read up the MSE stuff on LISAs.

Good point re employee vs freelancer. We did look at that when she started with them. She has been hired to provided specific skills and work on a specific project. So in that respect it is time limited. The other person she works along side is more senior and he’s with an agency. both contracted for the project. Uses her own computer etc , invoices them. However, she only works for them at the moment and she’s under their direction etc.

If she earns £10k, she could put in £10k Gross, so she adds £8000 and gets £2000 tax relief.

£3600 is for non earners, not non-tax payers.

Exactly this.