Pension contributions - personal or through company?

[glashIFA@Paramount]

OK. Maybe we can agree that if your salary is a fixed variable, and dividends distributed will vary based on whether the contribution is made via the company or personally then:

1. It is most tax efficient to make the payment personally provided your total pension contributions do not exceed 100% of salary.

2. If you want to contribute more than 100% of salary it would be best to pay upto 100% salary as personal contributions and the remainder via the company.

In other words you should never increase your salary solely for the purpose of increasing the amount you can contribute to you pension. I fully agree with you that increasing your salary to increase your relevant earnings and annual contribution limit is less efficient than making the additional contribution via the company.


Maybe - although personally I'm not convinced. If the law says I can contribute up to 100% of relevant earnings to a pension then HMRC can be as unrelaxed as it likes, but they can't tell me I've done anything wrong.

As to whether making high pension contributions raises a red flag and puts me on the tax man's radar, I'm equally sceptical. I'm sure a low salary/high dividend profile would raise more red flags than high pension contributions. After all paying more into pension funds is what the government are encouraging us to do.

Couldn't agree more, it's each case on it's merits. i was just trying to "give the bigger picture".
On the subject of the "red flag", that's up to you. I'm just passing on some info that i gleaned from the DWP and what there specific instructions are to Local Inspector of Taxes and what they want them to specificaly look out for as I've had to speak to them on behalf of clients. I'm making you aware of what they told me - whether you take on board their comments is of course up to you, it's just for general consumption.

[anorak]

Thanks...

Many thanks to everyone for their input; I'm somewhat clearer now. My annual contributions will not exceed my salary, so personal payments seem the way to go.

[Billy Pilgrim]

I am paying directly from the company account.

Losing out on a few % points gain over paying personally...but ensuring that IF there is an IR35 investigation and IF I fail I will be more than a few % points better off.