Pension Contribution - Accountant recommends Personal Contributoin

**Contreras** · 6 February 2015, 00:29

Originally posted by Fandango View Post

Does that sound right?

Nope.

You can only contribute personally up to 100% of earned income. Dividends don't count.

The SIPP contributions are better done personally up to 100% of salary (which you are right increases your basic rate allowance) and then company contributions above that amount. It typically makes sense to use up your ISA personal allowance fully before making the SIPP contributions. Even once you are maxed out on the ISA, consider investments outside of the SIPP altogether unless it saves on high rate tax. All IMHO, and dependent on personal circumstances of course.

Several threads on this in recent months if you do a forum search.

**MarillionFan** · 6 February 2015, 07:28

Originally posted by Fandango View Post

I was speaking to my accountant today as my end of year is up at the end of the month.

So far I've yet to put anything in a pension so I was running it by him that I was thinking of putting £20k into a SIPP. From what I've read on here it seems most people make contributions direct from their Ltd companies however my accountant said he recommends that I issue a £20k dividend and pay into the SIPP personally as it will show an increased income should I ever require another mortgage and that I get pension credits equalling the higher rate tax it would incur so it makes no difference.

Does that sound right?

Not from a dividend. You sure he said dividend.

Paying yourself an additional 20k would make sense though salary. That would show an increased income. You then make a personal payment of 20k and would get tax relief at 20%, so you could pay 20k and make it worth 24k, or make it 20k and get a tax rebate later.

**Contreras** · 6 February 2015, 08:02

Originally posted by MarillionFan View Post

Not from a dividend. You sure he said dividend.

Paying yourself an additional 20k would make sense though salary. That would show an increased income. You then make a personal payment of 20k and would get tax relief at 20%, so you could pay 20k and make it worth 24k, or make it 20k and get a tax rebate later.

The additional salary would incur employer and employee NICs so really no sense in doing that. Not sure what you mean by 'or make it 20k and get a tax rebate later'.

**SueEllen** · 6 February 2015, 08:25

If you require a mortgage and have years of accounts then you should be OK.

Where I live taking an extra 20K out of the company would do SFA in helping you buy a property due to the prices, so you may as well find a lender who looks at accounts or contract rate.

**Fandango** · 6 February 2015, 09:50

My Accountant definitely said dividends, not increase my salary.

He said it made no difference tax efficiency wise as the pension contribution credits cancel out the higher tax rate the dividnds would be subjected to.

We've only just moved 2 years ago so I can't see us moving anytime soon, so his comment about the benfit if it being seen as added income is of no real use in my particualr case, and i also understand that if the pension contributions were paid direct from the company then in the unlikely event of failing an IR35 investigation the £20k would not be classified as income unlike if i had taken it as a dividend?

so as a side point is he completely wrong when he says i can pay £20k into a pension after dividending myself £20k if my salary is only £7960 for the year?

**unixman** · 6 February 2015, 11:40

He is wrong. You are not allowed to put dividend money into a pension, only earnings. Dividends are not classed as earnings on this point.

See my thread here for details
http://forums.contractoruk.com/accou...dividends.html

I am planning to make a pension contribution of about 20 or 30k direct from my limited company. I might also make a personal contribution from my (smallish) salary.

**SueEllen** · 6 February 2015, 11:43

You can remortgage with a different provider and if you are on a 2 or 3 year fixed rate you are likely to do so. This is probably what he is talking about.

In regards to pension contributions your company can contribute what it thinks is commercially allowable* up to the contribution threshold for a company officer. So you can just put 20K of the company's money into your SIPP/pension making sure the SIPP/pension provider knows it's an employer's contribution.

I would also change accountants to one that can do basic research on pensions and mortgages for contractors, small business owners and self employed. It's important your accountant knows the difference for people in each circumstance as even though they aren't allowed to give financial advice they shouldn't give you incorrect information. (You can do this basic research yourself.)

* Can't remember the exact phraseology.

**Fandango** · 6 February 2015, 12:25

@SueEllen > Ah you're probably correct, i hadn't thought about it like that.

Yeah i'm not totally happy with him tbh.

He's not clear in his explanations and it would seem he's not offering correct advice either! He generally dismissive to my questions saying "don't worry about it, thats what you pay us for, we'll sort it out when we do your accounts. Just take what you need and we'll sort out the best way of accounting for it after". which is not an approach i'm happy with.

As i use FreeAgent and do my own VAT and RTI i really only need a basic service EOY service (inc SA for me and the mrs) and i can't really justify moving to one of the specialist contract Accountants who want £1200+vat /year for what would equate to less than a days work annually. However that said, paying an accountant who is giving wrong advice is pointless as well!

Any Accountants on here who could offer such a service feel free to get in touch!

**Forbes Young** · 6 February 2015, 12:51

Originally posted by Fandango View Post

@SueEllen > Ah you're probably correct, i hadn't thought about it like that.

Yeah i'm not totally happy with him tbh.

He's not clear in his explanations and it would seem he's not offering correct advice either! He generally dismissive to my questions saying "don't worry about it, thats what you pay us for, we'll sort it out when we do your accounts. Just take what you need and we'll sort out the best way of accounting for it after". which is not an approach i'm happy with.

As i use FreeAgent and do my own VAT and RTI i really only need a basic service EOY service (inc SA for me and the mrs) and i can't really justify moving to one of the specialist contract Accountants who want £1200+vat /year for what would equate to less than a days work annually. However that said, paying an accountant who is given wrong advice is pointless as well!

Any Accountants on here who could offer such a service feel free to get in touch!

My advice is to go to an IFA as opposed to an accountant - accountants need to be registered and regulated to give specific pension advice in any case. If they are registered they need to reapply for their licence each year and take part in CPD etc. I use Philip Lee of Hanson Wealth (tel 0191 4954745) if you want to check out your specific circumstances with him.

Graeme Bennett ACMA MBA

Pension Contribution - Accountant recommends Personal Contributoin