Unlimited Pension Contributions?

[GreenerGrass]

We still get asked this question daily.

There are no longer any limits to contributions you can make from your limited company income into pension funds; the amounts must simply not be very much larger than your actual declared corporate income.

John Yerou
Freelancer Financials

Just discovered this thread, as I asked something similar on another. Is "declared corporate income" only company salary or can it include dividend income?
Is "very much" 20% more, or 50% more, or double. It seems as clear as mud.

[Freelancer Financials]

Just discovered this thread, as I asked something similar on another. Is "declared corporate income" only company salary or can it include dividend income?
Is "very much" 20% more, or 50% more, or double. It seems as clear as mud.

No. Corporate Income is your gross earnings (the annual revenue you derive from contracting.

[GreenerGrass]

Ok, thats great but its a complete contradiction to what Nixon Williams were posting earlier on this thread.

As it happens I'm quite happy limiting my pension contribututions to 12k pa at the moment time but in a few years when the mortgage is paid off and my living costs are lower I plan on ramping up pension contribututions to 3 or 4 grand a month.
And a more aggressive policy from HMRC on IR35 would probably make me want to increase pension contributions a lot sooner.

[Freelancer Financials]

Ok, thats great but its a complete contradiction to what Nixon Williams were posting earlier on this thread.

As it happens I'm quite happy limiting my pension contribututions to 12k pa at the moment time but in a few years when the mortgage is paid off and my living costs are lower I plan on ramping up pension contribututions to 3 or 4 grand a month.
And a more aggressive policy from HMRC on IR35 would probably make me want to increase pension contributions a lot sooner.

At the time when Nixon Williams was posting, there was significant uncertainty as to how large employer contributions could be.

Since then HMRC have accepted that employer contributions by Contractor's one-man limited companies should be universally eligible for tax relief.

Recent guidance BIM446001 confirms that except for very limited circumstances, the payment of a pension contribution will be treated as part of the normal cost of employment and therefore will satisfy the “wholly and exclusively” requirement.

[An old-timer]

Recent guidance BIM446001 confirms that except for very limited circumstances, the payment of a pension contribution will be treated as part of the normal cost of employment and therefore will satisfy the “wholly and exclusively” requirement.

I'm in my late 50s so I was interested in the above comments. I've recently made large company payments into my pension (28K last year) but never in excess of my salary, as I thought that the maximum contribution was 100% of your salary. However I can't find reference to BIM446001 anywhere else except on this forum - in fact I searched on the HMRC site, which has a reference index to all BIMs, and again I could not find it. Is this the correct number for the BIM - if so, how can I get to read it as it's not even on the HMRC site!?

[Hex]

I'm in my late 50s so I was interested in the above comments. I've recently made large company payments into my pension (28K last year) but never in excess of my salary, as I thought that the maximum contribution was 100% of your salary. However I can't find reference to BIM446001 anywhere else except on this forum - in fact I searched on the HMRC site, which has a reference index to all BIMs, and again I could not find it. Is this the correct number for the BIM - if so, how can I get to read it as it's not even on the HMRC site!?

Maximum contribution of 100% of your salary is for Employee payments into your pension. Reason being that you will be paying these out of taxed income and so you can claim tax relief on these payments and get the tax back.

For Employer contributions there is no maximum. These contributions come out of the company coffers before tax is taken off and they are not eligible for tax relief within the pension. As they are not eligible for tax relief there is no reason to limit them to your salary amount. Your salary is irrelevant for Employer contributions.

[Peoplesoft bloke]

Maximum contribution of 100% of your salary is for Employee payments into your pension. Reason being that you will be paying these out of taxed income and so you can claim tax relief on these payments and get the tax back.
.

How are personal contributions made from dividend income treated?

[rootsnall]

How are personal contributions made from dividend income treated?

The previous poster was pointing out the difference between employee and employer contributions.

You wouldn't pay 'personal contributions made from dividend income'. You would pay employer contributions direct from the Ltd into your own personal pension ie. NI and tax free.

It now seems to be generally accepted ( but never 100% sure ) that you can pay a low salary and high employer contributions into your pension. In theory you could pay everything you earn into your pension and thus pay no tax or NI, but I suspect that would be asking for it !?!

[An old-timer]

It now seems to be generally accepted ( but never 100% sure ) that you can pay a low salary and high employer contributions into your pension. In theory you could pay everything you earn into your pension and thus pay no tax or NI, but I suspect that would be asking for it !?!

Yes, this is why I was interested in the reference to BIM446001, as it was claimed in an earlier post to clarify HMRC's position. I have taken a cautious stance and kept my company (i.e. employer) contributions to less than my salary, but it would be good to know that HMRC would not view an above-salary payment as suspect. Trying to get a definite answer on any of these issues always seems to be a struggle

[rootsnall]

Yes, this is why I was interested in the reference to BIM446001, as it was claimed in an earlier post to clarify HMRC's position. I have taken a cautious stance and kept my company (i.e. employer) contributions to less than my salary, but it would be good to know that HMRC would not view an above-salary payment as suspect. Trying to get a definite answer on any of these issues always seems to be a struggle

Impossible

I broke the rule for the first time last year, but didn't go mad.