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Pension Sanity Check

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    Pension Sanity Check

    Hello,

    I would appreciate a sanity check on pension contribtions.

    My understanding is you can (generally) contribute up to £40k a year into your personal pension.

    I also believe that "carry forward" lets you take advantage of any unused allowance from the previous three tax years. So that would be potentially up to £160k.

    If I contributed £20k in Year 4 and Year 3 when I was employed at a company and then contributed £40k via my contracting limited company in Year 2 and Year 1 that would (in general) mean I could still make a personal contribution of another £40k and still get tax relief?

    Just looking for a quick sanity check here - Thanks!

    d

    #2
    Be careful. In any one year personal contributions are limited to salary or £40k whichever is lower. For most contractors that means a £40k pension payment has to be direct from the company not via the individual. HTH.
    Public Service Posting by the BBC - Bloggs Bulls**t Corp.
    Officially CUK certified - Thick as f**k.

    Comment


      #3
      pension contribution from ltd

      There is also a limitation that if pension contribution is from ltd, then, need to set up for employer contribution scheme. So the questions are :
      1. If I set up pension scheme for ltd to contribute to now (half year in the way), do I still have 40k allowance?
      2. In the above situation, I do not have any carry forward any allowance right? As I only have personal pension schemes with ex-employers, but none of them can do employer contribution I think...

      Thanks a lot!

      Originally posted by Fred Bloggs View Post
      Be careful. In any one year personal contributions are limited to salary or £40k whichever is lower. For most contractors that means a £40k pension payment has to be direct from the company not via the individual. HTH.

      Comment


        #4
        Originally posted by Orangecat View Post
        There is also a limitation that if pension contribution is from ltd, then, need to set up for employer contribution scheme. So the questions are :
        1. If I set up pension scheme for ltd to contribute to now (half year in the way), do I still have 40k allowance?
        2. In the above situation, I do not have any carry forward any allowance right? As I only have personal pension schemes with ex-employers, but none of them can do employer contribution I think...

        Thanks a lot!
        I'm not sure if it was mentioned but the 40k can only be made if there is sufficient turnover to warrant such a contribution (according to 2 accountants I spoke to), ie you cannot make the 40k payment from retained funds in the company .

        Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

        Comment


          #5
          Originally posted by iguy2008 View Post
          I'm not sure if it was mentioned but the 40k can only be made if there is sufficient turnover to warrant such a contribution (according to 2 accountants I spoke to), ie you cannot make the 40k payment from retained funds in the company .

          Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app
          I'd say that's completely incorrect myself. If you are a Ltd Co director carrying that responsibility but sadly the company has no income one year, are you suggesting the director should not be rewarded by the company for his efforts from retained profit? Either via salary/dividends/pension contributions? I have been in that exact scenario with more than one Ltd Co.
          Public Service Posting by the BBC - Bloggs Bulls**t Corp.
          Officially CUK certified - Thick as f**k.

          Comment


            #6
            Plus I think you can only backfill full years - so 40k this year, then 40k last year, then whatever's left over. Going through this now but Vanguard only accept debit card top-ups, which caused me to discover Gnat West never set up any signatories on my account 12 years ago !

            Comment


              #7
              Originally posted by Fred Bloggs View Post
              I'd say that's completely incorrect myself. If you are a Ltd Co director carrying that responsibility but sadly the company has no income one year, are you suggesting the director should not be rewarded by the company for his efforts from retained profit? Either via salary/dividends/pension contributions? I have been in that exact scenario with more than one Ltd Co.
              Hi, yes it's possible draw salary and dividends from retained funds in the company. However, both the ipse tax people and my own accountant said it was not possible to make a pension payment unless turnover justified it. If anyone has been given different advice I would be happy to hear it, for my own situation also.

              Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

              Comment


                #8
                Originally posted by iguy2008 View Post
                Hi, yes it's possible draw salary and dividends from retained funds in the company. However, both the ipse tax people and my own accountant said it was not possible to make a pension payment unless turnover justified it. If anyone has been given different advice I would be happy to hear it, for my own situation also.

                Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app
                Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
                Last edited by Fred Bloggs; 25 July 2020, 01:19.
                Public Service Posting by the BBC - Bloggs Bulls**t Corp.
                Officially CUK certified - Thick as f**k.

                Comment


                  #9
                  Is/has anyone else plannin to contribute/ontributed large amounts to their pension without having a turnover to cover it ?
                  Originally posted by Fred Bloggs View Post
                  Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
                  Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

                  Comment


                    #10
                    Originally posted by Fred Bloggs View Post
                    Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
                    It might be worth adding when you did this.

                    Comment

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