Contractor's pension

[ASB]

If you are making company contributions (which is probably best for your circumstance since you get CT relief and NI doesn't come into it) it is important that the pension company knows it is a company contribution (no I can't tell you how to do that, but the pension provider should be able to).

In order to "absolutely max" the most tax efficient way for your circumstance it is probably a mix of limited personal contribution and company contribution, as alluded to by others.

Also, 833.33 is not the most cost effective salary in absolute NI and TAX consideration (this is more in the region of the NI threshold also also impacts the "best" method of contribution to pension is minor ways).

[ducks for cover]

There are loads of threads on both the above topics, so search. (Better use google search and /site:......).

It is quite a lot to take on board so read carefully etc.

[northernladuk]

Dude, if you're unfamiliar with things like this, get an accountant. The cost incurred if you screw things up greatly outweighs the cost of a trained professional.

+1 to this. It's only 1200 quid a year for peace of mind. Cheap as chips IMO.

[DigitalUser]

Hi,

I'm quite new to this so your response will be highly appreciated.

I'm familiarising myself with the Basic PAYE Tool, and I'm about to make my first RTI submission.

I'm just wondering, when I include a pension under the 'net pay aggreement', the taxed amount does not include the pension, but it's included in the calculation for NI.

Is that right? I thought that pension is tax free and NI-free.

Am I wrong?

Thanks

Dude, if you're unfamiliar with things like this, get an accountant. The cost incurred if you screw things up greatly outweighs the cost of a trained professional.

[ContrataxLtd]

Ah so I don't need to involve Pension at all into PAYE. Excellent. Didn't know that. So effectively under RTI my salary will be 833.33 and no pension will be recorded as such. Correct?

Correct, keep things simple

Martin

[amarkitanis]

You have two options, pay the £500 per month as a personal contribution from personal funds (this will give £625 into the pension pot after basic rate relief) or pay a company contribution direct from the company bank account (presumably £625 per month to give the same into the pension pot). Either way, you shouldn't need to involve the pension in the payroll calculations.

Best to run through all this with your accountant to ensure you are doing things as efficiently as possible as they will know your exact circumstances.

Martin
Contratax Ltd

Ah so I don't need to involve Pension at all into PAYE. Excellent. Didn't know that. So effectively under RTI my salary will be 833.33 and no pension will be recorded as such. Correct?

[ContrataxLtd]

Hi Martin,

First of all thank you for replying.

I'm planning to pay myself £833.33 which my monthly personal allowance. The minute I add 500£ in pension, my taxable income remains 833, but my I have to pay NI on 833.33 + 500.

What's the best strategy to not pay NI on pension?

You have two options, pay the £500 per month as a personal contribution from personal funds (this will give £625 into the pension pot after basic rate relief) or pay a company contribution direct from the company bank account (presumably £625 per month to give the same into the pension pot). Either way, you shouldn't need to involve the pension in the payroll calculations.

Best to run through all this with your accountant to ensure you are doing things as efficiently as possible as they will know your exact circumstances.

Martin
Contratax Ltd

[amarkitanis]

Hi Martin,

First of all thank you for replying.

I'm planning to pay myself £833.33 which my monthly personal allowance. The minute I add 500£ in pension, my taxable income remains 833, but my I have to pay NI on 833.33 + 500.

What's the best strategy to not pay NI on pension?

Hi amarkitanis

Based on what you've said this sounds about right. Generally with a net pay agreement the pension is in effect a personal contribution with the tax relief given via your salary. However, personal pension contributions do not attract relief for National Insurance and as such aren't generally the best way to do things.

The whole tax efficiency of things depends on your exact circumstances but if you are paying a salary that is attracting NI you would probably be better reducing this down and then making a combination of personal and company contributions from there.

HTH

Martin
Contratax Ltd

[ContrataxLtd]

Hi,

I'm quite new to this so your response will be highly appreciated.

I'm familiarising myself with the Basic PAYE Tool, and I'm about to make my first RTI submission.

I'm just wondering, when I include a pension under the 'net pay aggreement', the taxed amount does not include the pension, but it's included in the calculation for NI.

Is that right? I thought that pension is tax free and NI-free.

Am I wrong?

Thanks

Hi amarkitanis

Based on what you've said this sounds about right. Generally with a net pay agreement the pension is in effect a personal contribution with the tax relief given via your salary. However, personal pension contributions do not attract relief for National Insurance and as such aren't generally the best way to do things.

The whole tax efficiency of things depends on your exact circumstances but if you are paying a salary that is attracting NI you would probably be better reducing this down and then making a combination of personal and company contributions from there.

HTH

Martin
Contratax Ltd

[cojak]

Done.

[amarkitanis]

anyone can help me move it there?

[mudskipper]

You'd be better (and safer!) posting your question in the Accounting / Legal section. Our friendly accountants tend to hang out there and avoid General.

[amarkitanis]

Hi,

I'm quite new to this so your response will be highly appreciated.

I'm familiarising myself with the Basic PAYE Tool, and I'm about to make my first RTI submission.

I'm just wondering, when I include a pension under the 'net pay aggreement', the taxed amount does not include the pension, but it's included in the calculation for NI.

Is that right? I thought that pension is tax free and NI-free.

Am I wrong?

Thanks