Hopefully a simple question about making pension contributio

Hopefully a simple question about making pension contributio

Author
Discussion

nickfrog

Original Poster:

20,874 posts

216 months

Saturday 18th February 2017
quotequote all
Hello. I have a Ltd Company. It has made a 16k surplus profit last year that I haven't taken in dividend.

I'd like my Company to pay this money into a pension scheme in my name as an Employer's contribution. Surely this will reduce my corporation tax liability as it will be a Company's expense.

How do I go about doing this as we have nothing set up - I really don't care which pension provider we do it with as I just want to get rid of that money now or I will be dicking about for another 10 years.

Any decent providers you know of who offer this service ? (a Company pension scheme for the benefit of a Director)

Thanks a lot.

Nick

Jockman

17,912 posts

159 months

Saturday 18th February 2017
quotequote all
Too late to reduce last year's corp tax liability and you are not entitled to use carry back if you had no scheme in place.

We have set up SIPPs with Suffolk Life but there are cheaper providers out there.

Then yer, fill your boots up to your £40k allowance, subject to the usual rules.

mikef

4,827 posts

250 months

Saturday 18th February 2017
quotequote all
You didn't take everything out as dividend, but what did you pay yourself as salary? Afaik you can't pay more as pension than taken in salary - hopefully one of our helpful accountants can confirm or deny that

Jockman

17,912 posts

159 months

Saturday 18th February 2017
quotequote all
There is no salary link for an Employer Contribution.

trickywoo

11,706 posts

229 months

Sunday 19th February 2017
quotequote all
Jockman said:
There is no salary link for an Employer Contribution.
Correct. The main rules which apply are £40k per year and can carry forward 3 years unused allowance as long as a scheme was in place for each year. Payment periods apply to company year end and not April tax years.

Set up a SIPP. H&L, Fidelity and many more do no fuss options. I'm with Fidelity and when you set up a contribution they ask for company reg number address etc and then give you a reference to quote on the bank transfer from your Ltd account.

The SIPP is personal and yours to use as you see fit. Bear in mind you won't be able to access it without big tax penalties until 5 years before the state retirement age.

Eric Mc

121,785 posts

264 months

Sunday 19th February 2017
quotequote all
Were there any specific reason why the OP didn't extract any dividends?

PurpleMoonlight

22,362 posts

156 months

Sunday 19th February 2017
quotequote all
trickywoo said:
Bear in mind you won't be able to access it without big tax penalties until 5 years before the state retirement age.
10, currently.

trickywoo

11,706 posts

229 months

Sunday 19th February 2017
quotequote all
PurpleMoonlight said:
10, currently.
Thanks for correcting me.

58 for me but for younger people there must be concerns about moving goal posts. On thing is pretty certain - the age won't go down.

trickywoo

11,706 posts

229 months

Sunday 19th February 2017
quotequote all
Eric Mc said:
Were there any specific reason why the OP didn't extract any dividends?
I read it that he may have taken dividends but has an extra £16k on which he may not want to pay the additional dividend tax this year.

I'm taking less dividend this year for that reason.

Eric Mc

121,785 posts

264 months

Sunday 19th February 2017
quotequote all
Aren't we all (meaning powerfully built directors, of course).

FredClogs

14,041 posts

160 months

Sunday 19th February 2017
quotequote all
Start a sipp, ltd company just contributes what it likes into your sipp and it comes off the company account like any other expense, can do up to £40k a year,there is some roll over allowed too. You can also contribute personally and get the 25% tax added.

I've just done the same thing.

nickfrog

Original Poster:

20,874 posts

216 months

Tuesday 21st February 2017
quotequote all
Thanks for all the advice - sadly we didn't pay it in time so we got to pay Corporation tax on the profit (same as dividend tax I assume) - the plan is indeed for this to become a regular Company expense moving forward. I have other pension schemes from previous PAYE jobs : is a SIPP the same thing ? I am not very good at picking investments and those schemes suit me as I just choose in broad lines where my money goes.

Nano2nd

3,426 posts

255 months

Tuesday 21st February 2017
quotequote all
is there any advantage to the company making the contribution rather than taking the dividend then making the contribution personally and getting the 40% tax relief? won't reducing the profits potentially affect the company value? (lower EBITDA multiplier)

Granfondo

12,241 posts

205 months

Tuesday 21st February 2017
quotequote all
trickywoo said:
PurpleMoonlight said:
10, currently.
Thanks for correcting me.

58 for me but for younger people there must be concerns about moving goal posts. On thing is pretty certain - the age won't go down.
When did they change it from 55?

FredClogs

14,041 posts

160 months

Tuesday 21st February 2017
quotequote all
Nano2nd said:
is there any advantage to the company making the contribution rather than taking the dividend then making the contribution personally and getting the 40% tax relief? won't reducing the profits potentially affect the company value? (lower EBITDA multiplier)
Small company directors aren't engaging in good tax planning if they get into the 40% bracket. So it's a close call between saving the 20% Corp tax or claiming the 25% tax relief. I tend to split the difference.


FredClogs

14,041 posts

160 months

Tuesday 21st February 2017
quotequote all
nickfrog said:
Thanks for all the advice - sadly we didn't pay it in time so we got to pay Corporation tax on the profit (same as dividend tax I assume) - the plan is indeed for this to become a regular Company expense moving forward. I have other pension schemes from previous PAYE jobs : is a SIPP the same thing ? I am not very good at picking investments and those schemes suit me as I just choose in broad lines where my money goes.
There are about 3000 funds on the hl and best invest sipp platforms and plenty of advice on what funds to go for, I used to be like you in that I found it all a bit daunting but having spent the time doing research I'm actually quite into it now and pick my funds and investments as a bit of a past time. The main thing to look for is fees, you're going to pay about between 0.3% and 0.45% for the sipp platform and the funds range from 0.01% for a passive index tracker to 2% with specialist managed funds, some have performance fees too... I've tried to blend and mix so my aggregate fee is around 1% on the whole pot, this is what you'd pay for a standard stakeholder pension.


Nano2nd

3,426 posts

255 months

Tuesday 21st February 2017
quotequote all
FredClogs said:
Small company directors aren't engaging in good tax planning if they get into the 40% bracket. So it's a close call between saving the 20% Corp tax or claiming the 25% tax relief. I tend to split the difference.
unfortunately i'm 40% PAYE so when i comes to directors divis i'm **** out of luck (apart from the £5k obviously)

Jockman

17,912 posts

159 months

Tuesday 21st February 2017
quotequote all
Nano2nd said:
is there any advantage to the company making the contribution rather than taking the dividend then making the contribution personally and getting the 40% tax relief? won't reducing the profits potentially affect the company value? (lower EBITDA multiplier)
Remember dividends are not earned income. You cannot make personal contributions on the back of them alone.

Ebitda multipliers are generally performed on net profit i.e. PBIT. Dividends are listed after thus on a P&L.

Granfondo

12,241 posts

205 months

Wednesday 22nd February 2017
quotequote all
Granfondo said:
When did they change it from 55?
Anyone?

PurpleMoonlight

22,362 posts

156 months

Wednesday 22nd February 2017
quotequote all
It hasn't yet.

The Government have stated it will increase as SPA increases to maintain the 10 year gap.