Pension / last year CT bill & investments

**BenJeffrey** · 29 July 2018, 19:05

Stu, sounds to me like you need an accountant/a new one, preferably one that uses FreeAgent (Such a good tool)

There are a few good recommended accountants over the forums here, you'd be best contacting them and explaining your situation in depth - They'll be much better informed, at the end of the day, that's who the rest of us ask!

**stul** · 30 July 2018, 01:30

Originally posted by BenJeffrey View Post

Stu, sounds to me like you need an accountant/a new one, preferably one that uses FreeAgent (Such a good tool)

There are a few good recommended accountants over the forums here, you'd be best contacting them and explaining your situation in depth - They'll be much better informed, at the end of the day, that's who the rest of us ask!

BenJeffrey, I got an accountant but unfortunately they never guided me in first year and I realised it too late. I used them after reading number of recommendations on this forum but now landed in this situation. Will change accountant as well but currently looking for some way to improve things if possible.

**simes** · 30 July 2018, 08:15

I would tend to agree with Ben. Sounds like you may have an array of issues to deal with and put into order.

Do you already have an accountant?

**WordIsBond** · 30 July 2018, 09:46

I concur with what others have said. Get a good accountant, it's well worth it. If you had an accountant and he wasn't giving you good advice, lose him for someone better.

To strictly answer your question, you should be able to make pension contributions in your current year up to £40K. After that, you should be able to make up to £40K contributions on last year's allowance and carry it back to last year, which if you did so would reduce prior year CT by about £8K.

I don't believe you can do any carryback until you've already used this year's allowance, however. But doing so will reduce your CT this year as well.

**PhiltheGreek** · 30 July 2018, 10:18

Originally posted by WordIsBond View Post

I concur with what others have said. Get a good accountant, it's well worth it. If you had an accountant and he wasn't giving you good advice, lose him for someone better.

To strictly answer your question, you should be able to make pension contributions in your current year up to £40K. After that, you should be able to make up to £40K contributions on last year's allowance and carry it back to last year, which if you did so would reduce prior year CT by about £8K.

I don't believe you can do any carryback until you've already used this year's allowance, however. But doing so will reduce your CT this year as well.

Carryback after this year's allowance has been used starts with the 3rd previous year, then the second previous, and then last year. So, OP would need a £120k contribution in order to get to the point they are enquiring about.

**Maslins** · 30 July 2018, 10:50

Only reason you'll have a big CT bill is because your company made a big profit. If you're worried you'll struggle to pay the CT bill, then I don't see how a pension contribution would help. Putting £10k into a pension (at the right time) would realistically save you 1.9k CT, so your company would still be £8.1k cash down.

If you can't afford the CT bill, then I'd suggest your issues lie elsewhere.

If you can afford the CT bill fine, and you're just wanting to do things a bit differently next year to pay less tax, that's fine. You could start contributing to a pension scheme now (including potentially a £40k initial contribution if you've made no other contributions this tax year). This will reduce your company's profit in the year the contribution is made, so reduce the CT bill for that year.

You can't accrue/retrospectively try to account for a pension contribution. The date it's physically paid in is the relevant date.

So, if you're earning very well, and want to put the max into a pension, you may have slightly lost out (or check with an IFA see if you are able to use historic year's allowances). If you're more modest earning and maybe would be looking to put something like £10k/year into the pension, then no big deal, just put £20k in in your 2nd year to compensate for nothing being put in the first year.

**ContrataxLtd** · 30 July 2018, 11:01

You could also look at extending your year end and making the pension contribution before the new year end to speed up the benefit of the corporation tax saving on the contribution. This could be discussed with your accountant as it will depend on your current year end date in relation to today as you can't generally extend more than 6 months (less in your first year) and will also bring forward payment of the second periods corporation tax.

As Maslins has said, this won't help if cash flow is an issue though.

Martin
Contratax Ltd

**Lance** · 30 July 2018, 11:40

it's a bit of a 1st world problem really.
Made some profit and have to pay tax on it. That's kinda the territory.

I reckon you've got this all wrong. It's nice to reduce your CT bill by paying into a pension but you'll likely pay tax on that later anyway.
As this is your first year you are probably better with the retained profit in the company (a war chest) in case you end up out of work. That way you can still pay yourself while doing nothing.

Pensions should come after war chest.

**Cirrus** · 30 July 2018, 18:39

CT is never a problem. It comes out of profits. Unless the money has come in, the Revenue won't be asking for their 20%.

What's happened here is you've gone and spent money that wasn't yours. It's not a question of being a novice. Anybody knows if you are receiving income, you need to pay tax. It was reckless. That's the word you need.

Although you are a bad person, you're by no means the only bad person there's ever been. As a result the Revenue will have a strong feeling of deja vu, and let you pay them back what you owe in installments. It happens all the time. You'll just have to get used to living sensibly.

Pension / last year CT bill & investments