Pensions Pensions Pensions

[cojak]

Yes you are.

Amongst lots of other things you've forgotten corporation tax.

I'll let you research the percentage of your 100k you have to pay out on that...

[Contracting Knob]

Thanks for your help...........

I think I found the answer that even if you pay no tax you are still able to make a personal pension contribution of up to £2,880 and HMRC will top it up to £3,600.

In terms of corporations tax, would a pension contribuition on behalf of an employee by LTD not be an expense of the business like wages and thereby reduce the profit of the business in my hypothetical example to nothing ?

I realise VAT would be payable but was excluding it for the purposes of my example to keep it simple.

[lje]

Yes you are.

Amongst lots of other things you've forgotten corporation tax.

I'll let you research the percentage of your 100k you have to pay out on that...

If all of the money was paid out as salary and pension then there wouldn't be any profits and so there wouldn't be any corporation tax.

However, there won't be 20% tax refund on the 5k salary as no tax has been paid.

I'm not sure how HMRC would view this either...

[Contracting Knob]

Should also add I was excluding tax on exiting the funds from the pension eventually as well, which would obviously be payable.

[pmeswani]

If all of the money was paid out as salary and pension then there wouldn't be any profits and so there wouldn't be any corporation tax.

However, there won't be 20% tax refund on the 5k salary as no tax has been paid.

I can't express an opinion on the first bit, but I have to disagree with the second bit.

All my personal contributions I have made (based on my Tax & NI free pay of £5k) attracts the 20% contributions from HMRC. I've been receiving this from HMRC for the past couple of years. So far, HMRC have not ask for a refund!

[lje]

All my personal contributions I have made (based on my Tax & NI free pay of £5k) attracts the 20% contributions from HMRC. I've been receiving this from HMRC for the past couple of years. So far, HMRC have not ask for a refund!

You're right - I'd forgotten that that had changed.

[pmeswani]

You're right - I'd forgotten that that had changed.

To be honest, I am surprised that HMRC (and the LibCon Govt) haven't caught onto this loophole and tried to close it. But I won't complain, as long I can continue to contribute to my pension with some help from the Taxman.

A lot of people out there (Contractors & Permies) don't contribute to a pension (for whatever reasons), if they did... I'm sure the HMRC / Govt. would do something to close it.

[SackmanandCo]

A company pension scheme is normally better than a private one because Company gets tax relief at 21% plus avoid personal tax on dividends of 20% whereas private contributions are paid out of net income

[pmeswani]

A company pension scheme is normally better than a private one because Company gets tax relief at 21% plus avoid personal tax on dividends of 20% whereas private contributions are paid out of net income

Really? What's the key differences between the different pensions? Can't an employer contribute to a private pension plan? And why shouldn't the employee and employer contribute to either pension plan maximising the Tax benefits? 41% Tax savings is better than 20% or 21%. And with employee contributions, you get the Taxman to add money to your pension pot. Win Win situation.

[Stag Cozier]

A company pension scheme is normally better than a private one because Company gets tax relief at 21% plus avoid personal tax on dividends of 20% whereas private contributions are paid out of net income

Since when are divi's taxed at 20%?