pension paid through MSC and Self Assessment

**ASB** · 30 April 2007, 08:34

Originally posted by mjshrimpton

Just a quick question, no need for flaming I hope.

I was working through a <large> MSC, and am now using a limited.

I used the stakeholder pension they provided and paid in fairly large amounts monthly once the limits were removed, with this coming out of the invoice payments before being taxed.

When it comes to next years self assessment, I assume these are counted as employer contributions, not employee contributions, and I can't set them against income in the self assessment calculation to gain the tax relief, as I have already gained the tax relief...

cheers.

I think the only people who are likely to be able to know whether they were employer [gross] or employee [net] contributions will be you and the MSC between you. However, you description does seem to imply they were employer contributions, so yes there is no further tax relief available.

From a point of view of your current arrangements it may be beneficial to do a search, as a general rule employer contributions are probably the most cost effective, however there can be some limited circumstances in which employee contributions are better. It also depends on whether the source of the income which makes the contributions is salary or dividends. In the case where you are paid primarliy in dividends it is probably the case that employee contributions are best.

**mjshrimpton** · 30 April 2007, 08:47

cheers for the reply

Thanks. It would knock thousands off my self assessment, but would it be worth looking over my shoulder for 6 years.........

I will be moving primarily to dividend based earnings now, having lurked and taken the advice and not asked noddy questions, this board and it's stickies were helpful in determining who to use, and how to set things up. My contract is solid, and I have PCGplus insurance.

Are you essentially saying that it is better to offset the tax to pay on dividends above the HRT by paying personally into a pension, rather than have the company pay into the pension and sticking to divis up to the HRT, which is what I was planning.

I have a non-working (until now) spouse, and was going to pay her stakeholder through the company as well.

**ASB** · 30 April 2007, 09:08

Originally posted by mjshrimpton

Thanks. It would knock thousands off my self assessment, but would it be worth looking over my shoulder for 6 years.........

I will be moving primarily to dividend based earnings now, having lurked and taken the advice and not asked noddy questions, this board and it's stickies were helpful in determining who to use, and how to set things up. My contract is solid, and I have PCGplus insurance.

Are you essentially saying that it is better to offset the tax to pay on dividends above the HRT by paying personally into a pension, rather than have the company pay into the pension and sticking to divis up to the HRT, which is what I was planning.

I have a non-working (until now) spouse, and was going to pay her stakeholder through the company as well.

I'm saying it's not an easy answer it depends on exactly your position but:

If you ensure any remuneration to yourself if limited to < HRT and pay contributions from the employer above this then it may not yield the absolute maximum into the pot, but should be comfortable because if the income does get reassessed as Schedule E through a status enquiry at least the pension is still chargeable. [Notwithstanding the potential problem if the employer contributions are > 100% of salary]

If you want to max what is going into the pension at the same net cost then personal contributions will yield a bit more (4-7% depending upon circumstances) provided remuneration is mainly in the form of dividends.

There is certainly no "right" way. Whaty is best for any given individual depends on where the money comes from and their attitudes. For you it seems like simplpy paying yourself as much as you want in dividends and slapping it into a pension might be the most appropriate way. But I don't know.

It would be in your interest to review this and the assorted threads it mentions if you haven't already.

http://forums.contractoruk.com/threa...+employer.html

**mjshrimpton** · 30 April 2007, 09:45

whoosh

Lots in there to take in - many many thanks. I had read two of those threads and got halfway to understanding them

Looks like it boils down to confidence in not being done under IR35 investigation = personal is a bit more effective

Not sure = Company to mitigate any further tax demands.

Can I do both into the same stakeholder , therefore hedging some of my bets? Or is it not worth the faff. I am only set to get salary of 7500 at the moment, but it looks like there is no limit on what can be put in from either source at the moment.

**ASB** · 30 April 2007, 09:47

Yes, you can do both company and personal contributions to thew same stakeholder (at least in principle, providing it is acceptable to the provider).

**mjshrimpton** · 30 April 2007, 10:04

Cheers

Thanks for all your help. Much appreciated.

Now if only I had the bravery to claim the aforementioned payments as personal contributions for tax relief purposes, today could be a good day.

I doubt I will, but does Hector have the powers to delve right into the details on that. Especially as the company in question will I assume be closed as soon as possible.

I assume he does and I should prepare for a spell being poked in pokey if I choose to do that.

**ASB** · 30 April 2007, 10:48

"Now if only I had the bravery to claim the aforementioned payments as personal contributions for tax relief purposes, today could be a good day."

To a certain extent, for basic rate taxpayers at least, the system protects against that in that payments are made net and it is the pension itself that calims the relief. However, if you are a higher rate payer the additional relief is claimed yourself through your tax return which results in a reduction in your liabilites so yes you could claim it. You would certainly need a good explanation for the mistake though if challenged!

Of course it is worth ensuring that the contributions were genuinley made as employer contributions, in my limited experience with pension providers it is not unknown for the administration to completely cock things up.

pension paid through MSC and Self Assessment