Originally posted by LOCUM
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Pensions
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Funnily enough an IFA quoted the 9K figure to me the other day. Felt a bit embarrassed trying to correct him.⭐️ Gold Star ContractorComment
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Originally posted by Contreras View PostBear in mind that pension income will also be taxed so it's generally only worth doing (purely from a tax perspective) if it avoids higher rate tax, otherwise you might as well pay the basic rate tax on it now...
If your pension savings are in the lower hundreds of thousands rather than the £1 million neighbourhood then you have a pretty reasonable chance of only at most paying basic rate tax on it, which equates on average to 15%, taking the tax-free quarter into account.Comment
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I've just been reading through this thread with interest as I'm looking to make some additional pension contributions on behalf of my company.
I've been trying to get in touch with my accountant, but he's proving to be elusive at present so thought I'd ask here.
I have around £150k of available contributions under the carry forward rules and a big enough war chest to allow for that amount to put into my pension.
The NW link on a previous page says
It is possible to carry forward unused Annual Allowances from the previous three years (so in 2014/15 you could contribute up to £190,000) – in order to do this you must have been in a UK registered pension for the years from which you wish to carry forward allowances and you must earn at least as much in the tax year as you wish to contribute (£190,000 if you wished to contribute £190,000).
i.e. If my company makes a net profit of £100k in a particular company tax year, then could I stick £100k into my pension?Comment
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final confirmation before opening a SIPP
illustration:
- Total income into company=£100,000
- Expenses = 10,000
-Salary= £10,000
-Personal pension contribution=£10,000 (equivalent to pensionable salary)
- Retained profit=£70,000
(Need clarification on the following)
-Corporation tax = £ 14,000
-Dividend taken without any further tax =£ 30,000
- Because i put £10,000 as personal contributed pension i can take a further £10,000 as dividend without paying any further tax
-Do personal contributions towards pension reduce my corporation tax although they are 'personal'
please let me know if i got it rightComment
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Originally posted by LOCUM View Post-Do personal contributions towards pension reduce my corporation tax although they are 'personal'
Assuming your remuneration package (salary + pension) is reasonable, which it would be if you were the sole fee earner generating £100k revenue in the year, then it's a valid business expense - so yes.
Edit: there's an HMRC guidance page with 'clarification' conceding the above, which you might want to look up.
pps.: the other points you listed seem OK to me, but I still wouldn't do this without running it past an accountant / tax professional.Last edited by Contreras; 20 January 2015, 00:15.Comment
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Originally posted by Contreras View PostI think you mean "Do company contributions towards my personal pension reduce the company's corporation tax?"
Assuming your remuneration package (salary + pension) is reasonable, which it would be if you were the sole fee earner generating £100k revenue in the year, then it's a valid business expense - so yes.
Edit: there's an HMRC guidance page with 'clarification' conceding the above, which you might want to look up.
pps.: the other points you listed seem OK to me, but I still wouldn't do this without running it past an accountant / tax professional.Comment
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Originally posted by LOCUM View PostThis is another jargon i am unable to decipher despite some reading on various websites.What do they actually mean 'reasonable'.I am a sole earner ion the company earning well more than 100k.If i contribute around 20,000 as company contribution,will it be seen as reasonable ?
But I would suggest if you are sole fee earner then anything up to 100% income is reasonable.
If you were my client, I wild be happy with advising on that basis.Comment
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Originally posted by LOCUM View Post- Because i put £10,000 as personal contributed pension i can take a further £10,000 as dividend without paying any further tax
-Do personal contributions towards pension reduce my corporation tax although they are 'personal'
please let me know if i got it rightComment
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