£160k pension contribution including previous three years: is this a problem?

[TheFaQQer]

I did this a few years ago - similar situation re salary/dividends. Used an old pension scheme as justification and although the IFA said I may get questioned it went through fine.

I mentioned £120k to my IFA a few years back and he said that he'd had lots more than that be allocated in a similar fashion without batting an eyelid.

[MB2]

I expect is quite common with smaller ltds for directors to neglect pension contributions for a few years whilst building up the business, or have a good year and use to reduce CT liability.

[adubya]

As has been mentioned previously, you need to be aware of the "tapered annual allowance"

https://www.gov.uk/guidance/pension-...nual-allowance

You'd be in the ‘adjusted income’ is over £150,000 bracket, just need to check that your threshold income is below £110K


Example 3 is useful in the following guide
https://www.youinvest.co.uk/sites/de...e_tapering.pdf

[OneManBand]

Thanks for all the replies. My accountant hasn't got back yet, but he promised he'd be in touch by COB today. We shall see...

I understand that contributing the whole £160k now means I'd get hit by the tapered allowance rules. So contributing £80k this year and next years seems to be the way forward.

Stupid question: When my company makes a backdated pension contribution, can it choose to pay that from its retained earnings? Or is it implicitly always coming from the current year's earnings, and therefore has an effect on the current year's P/L position?

[Darren at Fox-Bartfield]

Pension

It would hit the current year P&L, presumably this will create a loss in the accounts?

[OneManBand]

It would hit the current year P&L, presumably this will create a loss in the accounts?

No, £80k won't create a loss for the year... I was just curious.

[Dark Black]

I have just opened a SIPP account. My accountant had previously said that my company can make not only the max £40k contribution to my pension this tax year, but also a £40k contribution for each of the previous three tax years, making the total contribution a massive £160k.

That got me all fired up, so I set up the SIPP and just asked him one last time if it’s OK if I now transferred the £160k to the SIPP account.

Top thread, been planning to do something similar, confirms my understanding.

Out of interest (and since there's been a few other threads about various SIPPs recently) which SIPP did you go for?

[OneManBand]

Top thread, been planning to do something similar, confirms my understanding.

Out of interest (and since there's been a few other threads about various SIPPs recently) which SIPP did you go for?

AJ Bell.

[adubya]

I understand that contributing the whole £160k now means I'd get hit by the tapered allowance rules.
?

Are you sure ? There are two thresholds you need to exceed, the "adjusted income" and the "threshold income".

"adjusted income" threshold (150K) includes company pension contributions so you'd exceed that.

But the "threshold income" (110K) is your income excluding the company pension contributions. You'd exceed that if your income is > £110K.

That's a lot of salary and dividends for a contractor.


Read example 3 of this -> https://www.youinvest.co.uk/sites/de...e_tapering.pdf

[adubya]

Top thread, been planning to do something similar, confirms my understanding.

Out of interest (and since there's been a few other threads about various SIPPs recently) which SIPP did you go for?

iWeb for me.