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Previously on "Pension Sanity Check"

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  • Contreras
    replied
    Originally posted by UKLonghorn View Post
    If I contributed £20k in Year 4 and Year 3 when I was employed at a company and then contributed £40k via my contracting limited company in Year 2 and Year 1 that would (in general) mean I could still make a personal contribution of another £40k and still get tax relief?
    Yes. Obviously there may be caveats relating to specific circumstances, but generally - yes.

    Carry forward allows you to make use of any annual allowance that you may not have used during the three previous tax years, provided that you were a member of a registered pension scheme.

    To use carry forward, you must make the maximum allowable contribution in the current tax year (£40,000 in 2020/21) and can then use unused annual allowances from the three previous tax years, starting with the tax year three years ago.
    Source: Carry Forward Annual Allowance

    Originally posted by Orangecat View Post
    There is also a limitation that if pension contribution is from ltd, then, need to set up for employer contribution scheme.
    Not quite. The pension scheme must allow employer contributions (that may be what you meant though). But generally there's no special "setup", it's just a matter of informing the pension co. on a per-contribution basis what type of contribution it is and of course it must be paid direct from your co. Fwiw, my SIPP provider specifically do not advertise this, you have to ask and they supply instructions for one-off company contributions (apparently offering the option confuses people and causes the pension co admin grief sorting it out).

    Originally posted by Orangecat View Post
    1. If I set up pension scheme for ltd to contribute to now (half year in the way), do I still have 40k allowance?
    Yes.

    Originally posted by Orangecat View Post
    2. In the above situation, I do not have any carry forward any allowance right? As I only have personal pension schemes with ex-employers, but none of them can do employer contribution I think...
    Maybe - see bolded text in the quote above. It says "a registered pension". I would give them a call. Also speak to the scheme providers. They can sometimes offer decent technical advice (that is, without getting into investment advice), unlike investment advisors who will say anything goes, IME!

    Originally posted by iguy2008 View Post
    both the ipse tax people and my own accountant said it was not possible to make a pension payment unless turnover justified it.
    Then they are both wrong, or there was a misunderstanding. The company can make pension contributions in excess of turnover for that year. That is assuming there is retained profit to do this. Also that you are the sole employee and fee earner for the company, i.e. all profit is/was of your making. In effect the company makes a loss for that year, which you can then claim a CT refund on earlier years. CT rules on carry back apply. I've done this as late as 2019.

    It should go without saying that all this is subject to specific circumstances.

    Leave a comment:


  • Fred Bloggs
    replied
    Originally posted by Paralytic View Post
    It might be worth adding when you did this.
    The last time was 2016.

    Leave a comment:


  • Paralytic
    replied
    Originally posted by Fred Bloggs View Post
    Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
    It might be worth adding when you did this.

    Leave a comment:


  • iguy2008
    replied
    Is/has anyone else plannin to contribute/ontributed large amounts to their pension without having a turnover to cover it ?
    Originally posted by Fred Bloggs View Post
    Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
    Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

    Leave a comment:


  • Fred Bloggs
    replied
    Originally posted by iguy2008 View Post
    Hi, yes it's possible draw salary and dividends from retained funds in the company. However, both the ipse tax people and my own accountant said it was not possible to make a pension payment unless turnover justified it. If anyone has been given different advice I would be happy to hear it, for my own situation also.

    Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app
    Fine, I've done exactly what you want twice with no come backs. On one occasion I got a corporation tax refund too as result of pension contribution leading to CT overpayment.
    Last edited by Fred Bloggs; 25 July 2020, 01:19.

    Leave a comment:


  • iguy2008
    replied
    Originally posted by Fred Bloggs View Post
    I'd say that's completely incorrect myself. If you are a Ltd Co director carrying that responsibility but sadly the company has no income one year, are you suggesting the director should not be rewarded by the company for his efforts from retained profit? Either via salary/dividends/pension contributions? I have been in that exact scenario with more than one Ltd Co.
    Hi, yes it's possible draw salary and dividends from retained funds in the company. However, both the ipse tax people and my own accountant said it was not possible to make a pension payment unless turnover justified it. If anyone has been given different advice I would be happy to hear it, for my own situation also.

    Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

    Leave a comment:


  • radish2008
    replied
    Plus I think you can only backfill full years - so 40k this year, then 40k last year, then whatever's left over. Going through this now but Vanguard only accept debit card top-ups, which caused me to discover Gnat West never set up any signatories on my account 12 years ago !

    Leave a comment:


  • Fred Bloggs
    replied
    Originally posted by iguy2008 View Post
    I'm not sure if it was mentioned but the 40k can only be made if there is sufficient turnover to warrant such a contribution (according to 2 accountants I spoke to), ie you cannot make the 40k payment from retained funds in the company .

    Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app
    I'd say that's completely incorrect myself. If you are a Ltd Co director carrying that responsibility but sadly the company has no income one year, are you suggesting the director should not be rewarded by the company for his efforts from retained profit? Either via salary/dividends/pension contributions? I have been in that exact scenario with more than one Ltd Co.

    Leave a comment:


  • iguy2008
    replied
    Originally posted by Orangecat View Post
    There is also a limitation that if pension contribution is from ltd, then, need to set up for employer contribution scheme. So the questions are :
    1. If I set up pension scheme for ltd to contribute to now (half year in the way), do I still have 40k allowance?
    2. In the above situation, I do not have any carry forward any allowance right? As I only have personal pension schemes with ex-employers, but none of them can do employer contribution I think...

    Thanks a lot!
    I'm not sure if it was mentioned but the 40k can only be made if there is sufficient turnover to warrant such a contribution (according to 2 accountants I spoke to), ie you cannot make the 40k payment from retained funds in the company .

    Sent from my Redmi Note 8 Pro using Contractor UK Forum mobile app

    Leave a comment:


  • Orangecat
    replied
    pension contribution from ltd

    There is also a limitation that if pension contribution is from ltd, then, need to set up for employer contribution scheme. So the questions are :
    1. If I set up pension scheme for ltd to contribute to now (half year in the way), do I still have 40k allowance?
    2. In the above situation, I do not have any carry forward any allowance right? As I only have personal pension schemes with ex-employers, but none of them can do employer contribution I think...

    Thanks a lot!

    Originally posted by Fred Bloggs View Post
    Be careful. In any one year personal contributions are limited to salary or £40k whichever is lower. For most contractors that means a £40k pension payment has to be direct from the company not via the individual. HTH.

    Leave a comment:


  • Fred Bloggs
    replied
    Be careful. In any one year personal contributions are limited to salary or £40k whichever is lower. For most contractors that means a £40k pension payment has to be direct from the company not via the individual. HTH.

    Leave a comment:


  • UKLonghorn
    started a topic Pension Sanity Check

    Pension Sanity Check

    Hello,

    I would appreciate a sanity check on pension contribtions.

    My understanding is you can (generally) contribute up to £40k a year into your personal pension.

    I also believe that "carry forward" lets you take advantage of any unused allowance from the previous three tax years. So that would be potentially up to £160k.

    If I contributed £20k in Year 4 and Year 3 when I was employed at a company and then contributed £40k via my contracting limited company in Year 2 and Year 1 that would (in general) mean I could still make a personal contribution of another £40k and still get tax relief?

    Just looking for a quick sanity check here - Thanks!

    d

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