Reply to: Going to the Darkside - what to do with Company any ideas

[rootsnall]

Thanks for all the good advice will chat to my accountants today.

However, I still don't understand fully the Umbrella part of this, if your Umbrella puts the majority of your day rate into your pension from the Umbrella etc., How does that touch the money in our LTD company accounts do I start paying myself from there?

I will catch up with my accountants just like to understand a little more before I did.

The umbrella is for my current work, nothing to do with a Ltd. So it's how you should possibly do things if you are working now or in the future.

Your Ltd with cash in it is a different issue altogether. You need to talk to your accountant and see what they'll allow you to do. For any future earnings I think you can pay almost all of it directly into a SIPP/pension. You'll have to ask if there is any scope for using what is in the Ltd now and/or previous years to make a large backdated payment. I would be sceptical of backdated and a tax reclaim but see what your accountant says.

[GregRickshaw]

Correct, that's what I'm doing. The umbrella I was using and been totally mistake free is handing me over to a better known outfit this week. Haven't bothered asking why but a buy out I assume. Lets see how they do. They already say they can't do the hours @ min wage setup, which I could do on a fag packet in 10 secs, but it's on very large percentage going into the pension which is roughly the same thing.

I have also done the same with a Ltd in the past. Talk to your accountant. Should be routine.

Thanks for all the good advice will chat to my accountants today.

However, I still don't understand fully the Umbrella part of this, if your Umbrella puts the majority of your day rate into your pension from the Umbrella etc., How does that touch the money in our LTD company accounts do I start paying myself from there?

I will catch up with my accountants just like to understand a little more before I did.

[rootsnall]

IIRC some umbrellas will allow you to put most of your day rate into a pension as long as they adhere to minimum wage regulations. So they'll calculate something along the lines of 40 hours @ £8.72 to pay to you and the rest goes into your pension (that's my understanding, it's most likely more nuanced than that in practice). It may be possible to do the same from your Ltd Co but you ought to check with your accountant and IFA to make sure you remain within all the various rules.

Correct, that's what I'm doing. The umbrella I was using and been totally mistake free is handing me over to a better known outfit this week. Haven't bothered asking why but a buy out I assume. Lets see how they do. They already say they can't do the hours @ min wage setup, which I could do on a fag packet in 10 secs, but it's on very large percentage going into the pension which is roughly the same thing.

I have also done the same with a Ltd in the past. Talk to your accountant. Should be routine.

[ladymuck]

When you say 'paying yourself minimum wage' through an Umbrella, how did you manage this? I'm not sure what you mean but I would like to know how to best get my money out of my LTD, this sounds interesting?

IIRC some umbrellas will allow you to put most of your day rate into a pension as long as they adhere to minimum wage regulations. So they'll calculate something along the lines of 40 hours @ £8.72 to pay to you and the rest goes into your pension (that's my understanding, it's most likely more nuanced than that in practice). It may be possible to do the same from your Ltd Co but you ought to check with your accountant and IFA to make sure you remain within all the various rules.

[GregRickshaw]

You are ok still at 55 ( see eek's latest post ). You really should be paying as much as you can afford into a SIPP. I am working through an umbrella and paying myself the minimum wage on hours worked and the rest ( the vast majority of it ) goes into a SIPP. My tax and NI bill comes to sums like 57p :-) It is taxable when it comes out of the SIPP but you'll have £12K tax free and you've avoided a double dose of NI.

My Ltd got fully struck off today

When you say 'paying yourself minimum wage' through an Umbrella, how did you manage this? I'm not sure what you mean but I would like to know how to best get my money out of my LTD, this sounds interesting?

[Old Greg]

Pension ?

Chap I know just snuffed it - 4 days into retirement covid19

Live for today people


Sent from my iPhone using Contractor UK Forum

Not a friend though?

[NowPermOutsideUK]

True but some people cannot sleep today knowing the fridge will be empty tomorrow so planning sometimes does help ..

I think more people will be looking at pension top ups to optimise tax from perm / FTC / inside salaries

[GhostofTarbera]

Maybe it’s just me but I’m confused

Someone earning 10k as director can decide to stuff their pension with three years back pension of 40k a year? Is that what you are saying?

But the pension payment needs to be paid by the employer rather than the employee? What net effect does that distinction habe exactly and does it make a difference ?

I follow the corp tax refund of a loss made. No arguments there

Pension ?

Chap I know just snuffed it - 4 days into retirement covid19

Live for today people


Sent from my iPhone using Contractor UK Forum

[NowPermOutsideUK]

Maybe it’s just me but I’m confused

Someone earning 10k as director can decide to stuff their pension with three years back pension of 40k a year? Is that what you are saying?

But the pension payment needs to be paid by the employer rather than the employee? What net effect does that distinction habe exactly and does it make a difference ?

I follow the corp tax refund of a loss made. No arguments there

[eek]

It was a struggle to get my accountant to pay a large lump sum earned in the current Ltd tax year once I wasn't earning any more. I would say no chance they'd go back into previous years, it would need the taxman to actually pay you a refund from previous years to make it worthwhile !? Or am I missing something. Quite possible.

Yes - company pays a large amount into your pension pot - so company runs at a loss this year.

You can then reclaim previously paid profits back from HMRC to cover that loss see Work out and claim relief from Corporation Tax trading losses - GOV.UK

[rootsnall]

Not if its paid by your employer - the "payment must be less or equal to salary" is only for personal payments into your pension.

It was a struggle to get my accountant to pay a large lump sum earned in the current Ltd tax year once I wasn't earning any more. I would say no chance they'd go back into previous years, it would need the taxman to actually pay you a refund from previous years to make it worthwhile !? Or am I missing something. Quite possible.

[Paralytic]

So you'd need to earn it in the current year.

Not if its paid by your employer - the "payment must be less or equal to salary" is only for personal payments into your pension.

[rootsnall]

Can i just ask whether you are sure about the year back pay? If you have not paid anything for the last few years can you really put up to 120K in one tax year into your pension? I did a google search as well

SIPP Allowance, SIPP Maximum Contribution Limit, HMRC Investment Rules

Pension carry forward

Pension carry forward rules let you make contributions above your annual allowance. If you paid in less than your annual allowance in any of the past three tax years you can carry forward the unused allowance, as long as you had a SIPP or other pension in place for each of the three years and your total contributions don’t exceed your current earnings.


So you'd need to earn it in the current year.

[NowPermOutsideUK]

Original Poster - you just pay into your pension directly from your Ltd ( max £40K + 3 years backdating if unused) , it counts as an expense. So tax and NI free until withdrawn. If you can afford to do it and not pay dividends it's a bit of a no brainer tax and NI wise.

Can i just ask whether you are sure about the year back pay? If you have not paid anything for the last few years can you really put up to 120K in one tax year into your pension? I did a google search as well

[rootsnall]

I decided to keep my LTD, I haven't gone to the total dark side, I went back to Umbrella. I took a contract which is 'on the tools' to get through Covid etc.,

Most of my contracts will always be considered outside anyway, yes I don't do anything but talk

So I made my LTD dormant, there's money still in there and I'm going to leave it there until I get better advice on what to do with it when I get near 57.

You are ok still at 55 ( see eek's latest post ). You really should be paying as much as you can afford into a SIPP. I am working through an umbrella and paying myself the minimum wage on hours worked and the rest ( the vast majority of it ) goes into a SIPP. My tax and NI bill comes to sums like 57p :-) It is taxable when it comes out of the SIPP but you'll have £12K tax free and you've avoided a double dose of NI.

My Ltd got fully struck off today