Reply to: Pension contributions can be used to relieve LC19

[infossa]

Thanks to Iliketax, Starstruck and Loan ranger..Great contributions to the thread/ common public..

I went through all pages and still have some questions that needs some guidance from seniors here..

Shall i assume that if i need to settle via Pension route, All i need to wait till Apr 2019 Loan charge or until HMRC sends the notice to me ?

Do the previous loan payments received will be added into 2018-19 or 2019-20 ?

Is it better idea to stop taking salary and dividend from the LTD company from now on if the loans (100k ish) are to be included in the current financial year ?

Advance thanks for the suggestions..

[starstruck]

I am curious here about what is meant by point (iii) - i.e. your limited company making pension contributions (to offset the 2019 Loan Charge).

I am in a position where I could make a large pension contribution (via carry forward) to offset LC19 but only if it could be paid for by my limited company.
(I have a large balance in the company, but a small amount personally).

If I had to draw it down via salary/dividends and then make the pension contribution, I believe it woudn't be worth it.

Can anyone offer some insight into how this works?

(iii) just means you need to consider that your Ltd could make pension contributions instead of you personally and you should weight up the pros/cons of the two options

But in your case you cannot make company contributions to offset loan charge. Your tax bands are only changed by personal contributions, company ones are paid gross anyway and so don't affect your personal tax paid.

All I can think of is you borrow the money to pay the pension personally and then save up over the years to repay that (e.g. re-mortgage, personal loan, loan from Ltd etc..).

[shevlane]

LC19 - Pension contribution by your limited company

I've commented on pensions a few other times. It will be very fact specific whether it is a good idea to make personal pension contributions to offset the loan charge, especially if (i) you are close to the LTA, (ii) you are likely to be a 40% / 45% taxpayer in retirement, (iii) your limited company could make them.

I am curious here about what is meant by point (iii) - i.e. your limited company making pension contributions (to offset the 2019 Loan Charge).

I am in a position where I could make a large pension contribution (via carry forward) to offset LC19 but only if it could be paid for by my limited company.
(I have a large balance in the company, but a small amount personally).

If I had to draw it down via salary/dividends and then make the pension contribution, I believe it woudn't be worth it.

Can anyone offer some insight into how this works?

[starstruck]

Do you know from which loan/income amount it the pension allowance starts to taper?

Have a read of this ... https://adviser.royallondon.com/tech...-high-incomes/

[starstruck]

I very much doubt that a non res will be able to get any unused allowances from previous years if they were non resident. Also remember the 40K in 2018/19 could be reduced to 10k if your loan values are high.

To clarify - was just correcting the figures for UK residents.

[Loan Ranger]

Do you know from which loan/income amount it the pension allowance starts to taper?

It starts to taper when

Total income - pension contributions > £110,000

If the above condition is met then the allowance is reduced by

(Total income - £150,000) / 2

The reduction is capped at £30,000

[Fred Bloggs]

I very much doubt that a non res will be able to get any unused allowances from previous years if they were non resident. Also remember the 40K in 2018/19 could be reduced to 10k if your loan values are high.

You would need to check it out properly, but I believe you can do this until you have been non resident for five years.

[EBTContractor]

I very much doubt that a non res will be able to get any unused allowances from previous years if they were non resident. Also remember the 40K in 2018/19 could be reduced to 10k if your loan values are high.

Do you know from which loan/income amount it the pension allowance starts to taper?

[Delendog]

It’s 40k and 160k.

I very much doubt that a non res will be able to get any unused allowances from previous years if they were non resident. Also remember the 40K in 2018/19 could be reduced to 10k if your loan values are high.

[starstruck]

Does that mean that everyone, UK resident or non-UK resident, will be given the same annual current maximum pension contribution of £30,000 in 2018/2019?

Or will everyone, UK resident or non-UK resident be allowed to carry forward any unused allowances from the 3 previous years totaling £120,000 in 2018/2019?

It’s 40k and 160k.

[Loan Ranger]

Interesting, also I agree, HMRC have Already said that LC will be classed as relevant earnings for pension relief purposes and therefore that first bullet point strongly indicates having such earnings is all you need to be eligible for the relief.
It also tells me that I clearly don’t understand the rules of pensions well enough.

Assuming it is correct, the next question is:

Can a person, who is non-resident, carry forward the previous 3 years unused allowance?

For people with big loans, it's only the ability to carry forward which provides significant tax relief.

[phil@pmtc]

LC19 creates a very unusual situation. Even though you may be non-resident in 2018/19, you are deemed as earning a shed load of UK taxable income.

I think being in receipt of LC19 would make someone a "relevant UK individual" for tax relief on pension contributions. See first bullet point.

How does an individual meet the 'relevant UK individual' requirement for tax relievable pension contributions?

As an aside, this could all get very messy if the tax authority, where you reside, also regards LC19 as taxable income.

PS. even some pension advisors may have a hard time getting their head around this

Interesting, also I agree, HMRC have Already said that LC will be classed as relevant earnings for pension relief purposes and therefore that first bullet point strongly indicates having such earnings is all you need to be eligible for the relief.
It also tells me that I clearly don’t understand the rules of pensions well enough.

[Loan Ranger]

LC19 creates a very unusual situation. Even though you may be non-resident in 2018/19, you are deemed as earning a shed load of UK taxable income.

I think being in receipt of LC19 would make someone a "relevant UK individual" for tax relief on pension contributions. See first bullet point.

How does an individual meet the 'relevant UK individual' requirement for tax relievable pension contributions?

As an aside, this could all get very messy if the tax authority, where you reside, also regards LC19 as taxable income.

PS. even some pension advisors may have a hard time getting their head around this

[InNZ]

I have a UK pension and can make contributions from a UK bank account if that makes a difference?

I was told by Standard Life that I could only contribute into my UK pension for only the first 5 years after moving abroad. You might be cutting it close if you left in 2014.

[EBTContractor]

The Part 7A tax charge is employment income and so relevant UK income. Or in other words you can delete "-ish" as it counts in the same way as normal pay.

Does that mean that everyone, UK resident or non-UK resident, will be given the same annual current maximum pension contribution of £30,000 in 2018/2019?

Or will everyone, UK resident or non-UK resident be allowed to carry forward any unused allowances from the 3 previous years totaling £120,000 in 2018/2019?