Pension contributions can be used to relieve LC19

[Loan Ranger]

From the horse's mouth.

https://www.whatdotheyknow.com/reque..._passthrough=1

"The total value of any outstanding loans subject to the 2019 loan charge will count as relevant UK earnings for pension tax relief purposes."

EIS, SEIS and/or VCT can also be used to relieve income tax although, by their very nature, these are more risky investments.

https://forums.contractoruk.com/hmrc...an-charge.html

Can any of the experts here think of any other tax reliefs which could be used?

[Iliketax]

From the horse's mouth.

https://www.whatdotheyknow.com/reque..._passthrough=1

"The total value of any outstanding loans subject to the 2019 loan charge will count as relevant UK earnings for pension tax relief purposes."

Am I allowed to say told you so:

The Part 7A tax charge is employment income and so relevant UK income. Or in other words you can delete "-ish" as it counts in the same way as normal pay.

But I would never have thought about using an FOI request to get confirmation.

[phil@pmtc]

This is great news (in comparison to rest of the shambles) for many. Well done to the person making the FOI.

[ChimpMaster]

You'll need a lot more funds to do this though.

Can anyone more knowledgeable run through some examples, say on using maximum pension contributions (£130,000?) and a 2019 income of:

a) £100,000

b) £200,000

c) £300,000

?

[Iliketax]

I'm not in any way an expert, so take this with a pinch of salt, but ...

You might want to think about how the annual allowance is tapered to £10,000 in 2018/19 with some of those examples. If you want to get more realistic, you might also want to think how it looks from a cash perspective too (i.e. what is actually contributed and when tax relief is available) as that will impact what people can afford.

[Loan Ranger]

Am I allowed to say told you so:

I missed your comment as it was contained in a much longer reply.

However, many others on the original thread dismissed the idea. The mods were even asked to prefix the title with (Possibly).

https://forums.contractoruk.com/hmrc...an-charge.html

[Iliketax]

I missed your comment as it was contained in a much longer reply.

However, many others on the original thread dismissed the idea. The mods were even asked to prefix the title with (Possibly).

https://forums.contractoruk.com/hmrc...an-charge.html

I see what you mean. The tax legislation is actually quite clear on this.

I've commented on pensions a few other times. It will be very fact specific whether it is a good idea to make personal pension contributions to offset the loan charge, especially if (i) you are close to the LTA, (ii) you are likely to be a 40% / 45% taxpayer in retirement, (iii) your limited company could make them. Other things that matter is whether you can afford them, how close to retirement you are (to be able to get the PCLS without being in the recycling rules) and your attitude to pensions.

To save another question, if the limited company can make them then the question is whether you should be using your own cash that's already been taxed to make tax-relievable contributions vs how you will otherwise get cash out of the company in the future (in both cases assuming the same gross amount goes into the pension).

[fuhector]

You might want to think about how the annual allowance is tapered to £10,000 in 2018/19 with some of those examples. If you want to get more realistic, you might also want to think how it looks from a cash perspective too (i.e. what is actually contributed and when tax relief is available) as that will impact what people can afford.

I've deleted my post now as it's clearly misleading

[ChimpMaster]

I see what you mean. The tax legislation is actually quite clear on this.

I've commented on pensions a few other times. It will be very fact specific whether it is a good idea to make personal pension contributions to offset the loan charge, especially if (i) you are close to the LTA, (ii) you are likely to be a 40% / 45% taxpayer in retirement, (iii) your limited company could make them. Other things that matter is whether you can afford them, how close to retirement you are (to be able to get the PCLS without being in the recycling rules) and your attitude to pensions.

To save another question, if the limited company can make them then the question is whether you should be using your own cash that's already been taxed to make tax-relievable contributions vs how you will otherwise get cash out of the company in the future (in both cases assuming the same gross amount goes into the pension).

Bearing in mind I have no experience of personal pensions:

If the company makes the contributions then does this still work in the same way as making the contribution yourself from post-tax income? i.e. can you still use prior years' allowances to max out at £130k and then claim the £130k against 2019 income?

[Safe]

Bearing in mind I have no experience of personal pensions:

If the company makes the contributions then does this still work in the same way as making the contribution yourself from post-tax income? i.e. can you still use prior years' allowances to max out at £130k and then claim the £130k against 2019 income?

I think no you can't. The loan charge is related to you and not your company. Any pension contribution should be from your personal account not company account. If you do want to contribute from your company account for 2019 LC then you've to take dividend and pay appropriate tax on it. I might be wrong but happy to be corrected.