Pension

[someone has my name]

A Quicky for you ...
Can I claim my personal Stakeholder pension through my limited company expences?

[glashIFA@Paramount]

A Quicky for you ...
Can I claim my personal Stakeholder pension through my limited company expences?

If the contribution is personal then no. If it's an employer contribution then yes in as much as it's allowable against Corp Tax.

[r0bly0ns]

your limited company can pay money directly in to a stakeholder pension.

I think this applies to personal stakeholders as well

There are benefits from doing this, but I'm not sure what they are, speak to an accountant.

[mjshrimpton]

A Quicky for you ...
Can I claim my personal Stakeholder pension through my limited company expences?

Making them personally gives you a widening of the band for the 22% tax rate, so you need to pay less in tax under self assessment if you pay dividends into the higher rate. This apparently is just about (by a small amount) the most tax effective way of doing it.

Or you can pay them as employer contributions from your company, and they effectively reduce the CT bill. You can then also make personal contributions if you want.

Swings and roundabouts.

Also you can pay in what you like to a pension now, and not just the 100% of your salary, but HMRC have been very slow to clarify that.

[vhadiant]

Actually I'm thinking of doing this as well. So what is the step for doing this? Should I setup a personal pension and pay the pension from the company as employer contribution? This should reduce the net income of the company and thus reduce the tax?

[minstrel]

Actually I'm thinking of doing this as well. So what is the step for doing this? Should I setup a personal pension and pay the pension from the company as employer contribution? This should reduce the net income of the company and thus reduce the tax?

This tax year it's best to make the contribution personally as your company only pays 20% Corporation Tax and you get a 22% credit for your personal contributions.

Next tax year CT will be 21% and basic rate tax will only be 20%, so then it would be better to make the contribution via the company.

[glashIFA@Paramount]

Making them personally gives you a widening of the band for the 22% tax rate, so you need to pay less in tax under self assessment if you pay dividends into the higher rate. This apparently is just about (by a small amount) the most tax effective way of doing it.

Or you can pay them as employer contributions from your company, and they effectively reduce the CT bill. You can then also make personal contributions if you want.

Swings and roundabouts.

Also you can pay in what you like to a pension now, and not just the 100% of your salary, but HMRC have been very slow to clarify that.

Since April 2006 you've always been able to pay in what you want - in theory. The limits that are applied, max 100% of salary or £225,000 per annum are the contribution levels that will benefit from tax relief, so a bit pointless contributing over these levels. Unless of course it's the year in which you are going to take benefits in which case you can contribute whatever you like and obtain tax relief on the whole amount - but again the lifetime limit (max you can hold in a pension without incurring onerous tax charges) is £1.6m, so don't contribute more than that!!!!! Plenty of scope i think.

[glashIFA@Paramount]

your limited company can pay money directly in to a stakeholder pension.

I think this applies to personal stakeholders as well

There are benefits from doing this, but I'm not sure what they are, speak to an accountant.

Just to clarify - all stakeholders are personal, it's just about where the contribution comes from.

As stated on the thread, it's really marginal as to whether it's a personal or company contribution, and a lot depends on if you make a personal contribution will you have to replace that money - in other words, if you paid say, £300 per month personally would you then have to pay an additional £300 per month to yourself in the form of divis to maintain income levels or would the £300 personal contrib be out of surplus income. If you have to pay additional divis then I'd recommend a company contrib instead.

[vhadiant]

This tax year it's best to make the contribution personally as your company only pays 20% Corporation Tax and you get a 22% credit for your personal contributions.

Next tax year CT will be 21% and basic rate tax will only be 20%, so then it would be better to make the contribution via the company.

So that means increasing your salary/dividend and pay it personally? Currently I'm paying myself 10,500 per year and get the rest from dividend. If I do a personal contribution, how would I get the benefit? Will I have to do a tax assessment at the end of the financial year?

[minstrel]

So that means increasing your salary/dividend and pay it personally? Currently I'm paying myself 10,500 per year and get the rest from dividend. If I do a personal contribution, how would I get the benefit? Will I have to do a tax assessment at the end of the financial year?

As long as you don't want to contribute > £10,500 to your pension then just increase your dividends.

If you pay £10,000 into pension via company you end up with £10,000 in your pension fund.

If you take 20% CT hit on £10,000, then distribute £8,000 as dividends and pay into pension fund personally you get a 22% credit from government and end up with £10,256.41 (8,000 * 0.78) in your pension fund.

In other words you are £250 better off making contribution personally.

Benefit is even greater for higher rate tax payers.

If you are higher rate tax payer then yes you will need to do a self assessment at the end of the year. IIRC you need to do one anyway if you are a company director.

Benefit is marginal and next tax year it will definitely be better to make contributions via the company, so it might not be worth the hassle of setting up personal contributions and then switching to company contributions next April. Depends how bothered you are about saving a few quid...