Pension and dividends

[ASB]

'Afternoon! Sorry to resurrect this thread so late. I have just re-read the whole thing and it is all good stuff. I just wanted to check re the limits above. I understand they apply to pension contributions made personally, from personal salary. But what limits apply to contributions made by your Ltd company into your personal pension ?

There is no limit on contributions. There is a limit on relief.

As clearly stated in the quote this is 40k. Total of all contributions.

The scheme member pays any tax where the annual allowance is exceeded.

[ChadGates]

Can I just check...

Hello.

I pretty much follow Retro's advice, with the exception of the platform as HL is getting expensive.

However, to put my mind at rest, can someone clarify this bit:
"... So, I would:
- Setup a SIPP with HL.
- Setup a monthly payment into the Vanguard Lifestrategy 80 fund (Gvmnt will top this up as a tax incentive, great for high-rate payers, you might have to claim the additional 20% through your self-assessment but this is easy)
- Hold your nerve... "

I my company pays my £750 contribution monthly to my SIPP and I invest the loot. Where should I be seeing this top up? Nothing extra goes into my SIPP, should I therefore see it on my SA return? It is completed by my accountant. I'll have to check, but, he knows about the company's pension deductions.

In short, how do I assure myself that I am getting the top up....

[jmo21]

Hello.

I pretty much follow Retro's advice, with the exception of the platform as HL is getting expensive.

However, to put my mind at rest, can someone clarify this bit:
"... So, I would:
- Setup a SIPP with HL.
- Setup a monthly payment into the Vanguard Lifestrategy 80 fund (Gvmnt will top this up as a tax incentive, great for high-rate payers, you might have to claim the additional 20% through your self-assessment but this is easy)
- Hold your nerve... "

I my company pays my £750 contribution monthly to my SIPP and I invest the loot. Where should I be seeing this top up? Nothing extra goes into my SIPP, should I therefore see it on my SA return? It is completed by my accountant. I'll have to check, but, he knows about the company's pension deductions.

In short, how do I assure myself that I am getting the top up....

That's because you're paying a company contribution, not a personal contribution.

[Scruff]

Your SIPP will receive the cash invective from the Guvvy and it will reflect in the cash balance. Takes about six weeks for H&L to receive the first amount.

[mudskipper]

Your SIPP will receive the cash invective from the Guvvy and it will reflect in the cash balance. Takes about six weeks for H&L to receive the first amount.

Only applicable to personal contributions.

Company contributions aren't subject to corp tax, so are already tax free.

[Craig at Nixon Williams]

'Afternoon! Sorry to resurrect this thread so late. I have just re-read the whole thing and it is all good stuff. I just wanted to check re the limits above. I understand they apply to pension contributions made personally, from personal salary. But what limits apply to contributions made by your Ltd company into your personal pension ?

The only limit to consider here is the £40k per annum - though there are ways to make larger contributions if you have unused allowances from prior years.

When it is a company contribution, the pension provider will not reclaim tax from HMRC (that is only applicable to personal contributions) but you will get relief from Corporation Tax.

[unixman]

What is the effective tax rate paid in dividends above the HR threhold ? I calculate it as 20% corporation tax on profit before dividends, followed by 25% higher rate dividend tax.

Multiplier = 0.8 * 0.75 = 0.6, that is to say an effective tax rate of 40%. Is that right ?

[IR35 Avoider]

2. A tracker is not necessarily the best investment. If a share rises, the tracker has to buy more of that share and if a share falls, the tracker has to sell part of its holding.

I know I'm several months late in pointing this out, but this is wrong. Vanilla equity index trackers are capitalisation weighted, so no shares need to be bought or sold in those scenarios.

The value of holdings in the fluctuating equity needs to go up and down in proportion to the price changes, but that is taken care of automatically by the change in share price.

One of the attractions of tracking a cap-weighted index is that such trackers need to do very little trading to stay on track.

Edit: If I'd bothered to read the rest of the thread I would have noticed this had already been addressed.

[I just need to test it]

I'm looking at maximising my personal pension contributions.

I have/own a rental property. It's mortgaged.

Is my total salary my Ltd Co salary + one year's rental yield? Or must I reduce this by the amount of my mortgage repayments?

[Craig at Nixon Williams]

I'm looking at maximising my personal pension contributions.

I have/own a rental property. It's mortgaged.

Is my total salary my Ltd Co salary + one year's rental yield? Or must I reduce this by the amount of my mortgage repayments?

That is not the case. Rental income would not count as relevant income for pensions and therefore you would not get tax relief on pension contributions made in excess of salary in this case.

The only exception to this is if the property qualifies as a furnished holiday let (there is a strict criteria for this), in which case the rental profits do count as relevant earnings.

If you want to contribute to your pension in excess of your salary, the excess could be made from the company and you would get corporation tax relief on the amount.

I hope this helps.
Craig