Originally posted by ASB
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Reply to: Unlimited Pension Contributions?
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Previously on "Unlimited Pension Contributions?"
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Thanks, seems my plans are sound, in today's legislative situation at any rate.
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A-day Pension Rule Changes
There was a massive overhaul in pension rules in April 2006. A few of the rules have been subsequently changed or tweaked. Some of the key rule changes are as follows:
Since A-day there has been no limit on the amount of personal contribution that can be paid into a registered scheme, although there is a limit on the amount that can benefit from tax relief.
This will be the higher of £3,600 (gross) and 100 per cent of “Relevant UK Earnings” up to a maximum of £245,000 in tax year 2009/10, rising to £255,000 in 2010/11. This is called the Annual Allowance.
If you still need further clarification on this matter contact one of the specialist contractor accountants that advertise on contractor UK.
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Pension Contributions from Company
Some of you are confusing a personal pension investment (which is indeed limited to 100% of salary) with the fact that you’re making an employer contribution.
Salary level doesn’t need to have a bearing on an employer contribution and so you should be free to invest all this years contract income into the pension if you choose. Contractors outside IR35 can now make company contributions to a pension of up to £245,000 per year, with a lifetime allowance of £1.75 million. This would obviously represent a very tax efficient method of transferring funds from company into personal hands.
I should mention that you must also have not earned in excess of £150k in either of the past 2 years otherwise contributions will be limited to either 20k or £30k.
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Originally posted by An old-timer View PostInteresting, that's basically what I'd like to do, have you had professional advice that putting 100% in is acceptable to HMRC? I'd like to read that BMI if I could find it....
Edit- It might have been on the Shout 99 website that I saw this.
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Gone but not forgotten..by me anyway
I've searched the HMRC site for the BMI446001 mentioned in earlier posts as giving the OK for large company pension contributions, but that document is no longer available. See for example the link to it from this page:
http://www.hmrc.gov.uk/manuals/ctmanual/CTM08341.htm
I've reported the link as broken to HMRC, in the hope that that they will subsitute a new link to whatever replaced BMI446001 (if anything) but I'm not holding my breath.
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Originally posted by An old-timer View PostInteresting, that's basically what I'd like to do, have you had professional advice that putting 100% in is acceptable to HMRC? I'd like to read that BMI if I could find it....
My plan this year is 12K salary ( ie. some PAYE and NI paid), one reasonable divi ( ie. some Corp Tax ) and then the rest into a SIPP. The theory is getting either down to zero might put you on the HMRC radar.
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Originally posted by Fred Bloggs View PostWithin the next 10 years I plan 2 or 3 years work where I put 100% of my Co turnover, minus expenses into the SIPP.
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Originally posted by An old-timer View PostYes, this is why I was interested in the reference to BIM446001, as it was claimed in an earlier post to clarify HMRC's position. I have taken a cautious stance and kept my company (i.e. employer) contributions to less than my salary, but it would be good to know that HMRC would not view an above-salary payment as suspect. Trying to get a definite answer on any of these issues always seems to be a struggle
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Originally posted by Peoplesoft bloke View PostHow are personal contributions made from dividend income treated?
Check with an accountant or IFA in case I'm wrong.
This link says you are limited to 100% of earnings and I presume this means earned income which includes salary but NOT dividends.
http://www.pensionsadvisoryservice.o.../contributions
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Originally posted by Peoplesoft bloke View PostI was asking about the position of a director who had already paid substantial divis and wished to use the funds to contribute to pension. I understand the post I quoted.
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Originally posted by rootsnall View PostThe previous poster was pointing out the difference between employee and employer contributions.
You wouldn't pay 'personal contributions made from dividend income'. You would pay employer contributions direct from the Ltd into your own personal pension ie. NI and tax free.
It now seems to be generally accepted ( but never 100% sure ) that you can pay a low salary and high employer contributions into your pension. In theory you could pay everything you earn into your pension and thus pay no tax or NI, but I suspect that would be asking for it !?!
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Originally posted by An old-timer View PostYes, this is why I was interested in the reference to BIM446001, as it was claimed in an earlier post to clarify HMRC's position. I have taken a cautious stance and kept my company (i.e. employer) contributions to less than my salary, but it would be good to know that HMRC would not view an above-salary payment as suspect. Trying to get a definite answer on any of these issues always seems to be a struggle
I broke the rule for the first time last year, but didn't go mad.
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Originally posted by rootsnall View PostIt now seems to be generally accepted ( but never 100% sure ) that you can pay a low salary and high employer contributions into your pension. In theory you could pay everything you earn into your pension and thus pay no tax or NI, but I suspect that would be asking for it !?!
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