Reply to: morgan stanley contract offer

[Amanensia]

Unless you can manage the extraction very carefully, though, pension funds are taxable on withdrawal, unlike ISA funds. And of course with an ISA you don't have to wait until you're 55/57/whatever. Both have their place.

[eek]

Pension is a company payment whereas an ISA is a personal one no?

Pension payment from a company is before any and all tax is paid (£40k invoice = £40k in the pension).

ISAs are only tax free from the moment the money is in the ISA but you need to pay tax on the money you put in there.

[northernladuk]

True, but without tax relief, is there any point using a pension instead of for example a stocks and shares ISA?

Pension is a company payment whereas an ISA is a personal one no?

[_V_]

Might sound pedantic, but its worth pointing out that there is no £40K limit on what can be contributed to a pension in any one tax year; that is simply the level at which tax relief is no longer available.

True, but without tax relief, is there any point using a pension instead of for example a stocks and shares ISA?

[Paralytic]

I don't believe you can pay more than £40K pa even as a company director outside IR35 into a pension (unless using unused allowance from previous years). There is still a cap of £40k per director, the difference is it is not relate to earnings.

Might sound pedantic, but its worth pointing out that there is no £40K limit on what can be contributed to a pension in any one tax year; that is simply the level at which tax relief is no longer available.

[Amanensia]

I don't believe you can pay more than £40K pa even as a company director outside IR35 into a pension (unless using unused allowance from previous years). There is still a cap of £40k per director, the difference is it is not relate to earnings.

I would check with your accountant. I could be wrong here

Company Director Pension [Guide] 2020 :: Drewberry™

Agreed, but it was implied (I think!) from the OP that he had historic year allowances to use up. As long as a pension was in place, even if not contributed to, for the previous three tax years, he'd have scope to throw £160k in as an employer's contribution in one year without any earnings check.

Being inside IR35 obviously complicates matters but I believe it's still possible to make employer contributions in a similar manner - although it may depend what "inside IR35" means. If it means operating via an Umbrella, then as long as the Umbrella provider is flexible enough (many aren't) it should be doable, subject to taking at least minimum wage as cash. If it means a fixed-term PAYE contract direct with the client then in theory the same applies, although it may be even less likely that the client would offer 100% (or close to 100%) salary sacrifice.

If it means operating via a limited company and using the deemed salary calculations, I don't know for sure as I've never looked into this scenario - but it would appear strange if employer contributions couldn't be made in the same way, without reference to earnings. It'd be interesting to know for sure.

[_V_]

Why?

I put £80k in last year and took a salary of £16k. There's no earnings-related restriction for employer contributions.

Edit: apologies, just spotted the bit about being inside IR35.

I don't believe you can pay more than £40K pa even as a company director outside IR35 into a pension (unless using unused allowance from previous years). There is still a cap of £40k per director, the difference is it is not relate to earnings.

I would check with your accountant. I could be wrong here

Company Director Pension [Guide] 2020 :: Drewberry™

[GhostofTarbera]

No master plan, just luck. Havent paid into pension for last 5 years, inherited some money this year which i can live off , so can pay up to 4 years into pension, obviously a one year tax help and then back to paying full paye.

Super, pity covid19 version 8 will kill us all off (Logan’s run) before we can retire




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[Amanensia]

You can pay into your pension up to £40k pa, but you have to pay yourself at least £40K pa too.

Why?

I put £80k in last year and took a salary of £16k. There's no earnings-related restriction for employer contributions.

Edit: apologies, just spotted the bit about being inside IR35.

[_V_]

Yeh .. I'm lucky in that I can live off savings and pay next 12 months money into pension, so legit zero tax

You can pay into your pension up to £40k pa, but you have to pay yourself at least £40K pa too. You can also use previous unused pension contribution (last three years), but again you need to pay a good salary.

[NowPermOutsideUK]

Good for you. I’m happy for you. Like I said I had a terrific time back ten years ago. It was solid and nice building as well

Pension contribution is excellent idea.

Don’t suppose you can give an indication of rough rates. Coming back to London finance is on the cards for a few people who left the Uk

[slogger]

You have to assume OP has Already maxed out previous years if this is his master plan


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No master plan, just luck. Havent paid into pension for last 5 years, inherited some money this year which i can live off , so can pay up to 4 years into pension, obviously a one year tax help and then back to paying full paye.

[GhostofTarbera]

Well, 160k for the last four years (including this one), assuming a pension was open and all contributions remain.

You have to assume OP has Already maxed out previous years if this is his master plan


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[jamesbrown]

That’s super duper idea, I did not realise MS paid such low rates (40K) are you doing reception work ?


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Well, 160k for the last four years (including this one), assuming a pension was open and all contributions remain.

[GhostofTarbera]

Yeh .. I'm lucky in that I can live off savings and pay next 12 months money into pension, so legit zero tax

That’s super duper idea, I did not realise MS paid such low rates (40K) are you doing reception work ?


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