Question about Pensions and income splitting?
Discussion
Not sure if this should be business or finance!
My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
98elise said:
Not sure if this should be business or finance!
My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
I have a similar situation with one caveat. My wife does no work for us. My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
She is a Director and Shareholder and as such attends board meetings and has the usual fiduciary duties that this entails.
We pay a monthly amount into her pension in lieu of payment for her responsibilities and we are advised to keep this sensible. HMRC would certainly query an excessive amount.
ringram said:
Directors are not subject to minimum wage laws.
So there is your answer. Pay her 100% in pension contribs/salary sacrifice
OR pay her divi which she pays direct into pension net result no tax (at end of year clean up)
They'll be Corp tax if paying the divi route...pension contributions are Corp tax deductable.So there is your answer. Pay her 100% in pension contribs/salary sacrifice
OR pay her divi which she pays direct into pension net result no tax (at end of year clean up)
Jockman said:
98elise said:
Not sure if this should be business or finance!
My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
I have a similar situation with one caveat. My wife does no work for us. My partner (as in wife rather then business) does my books and admin, and draws a small salary reflecting her hours and a normal admin hourly rate.
I asked my account about paying additional money into a pension for her and could this be seen as income splitting. The reply I got back said it's fine as the money is going into a pension rather than being drawn so would be viewed differently.
Going to an extreme could I max out her pension contributions and it still not be deemed income splitting, or would there be a level where the tax man would be unhappy? I'm going to ask my accountant tomorrow, but it's always worth asking for other people's experiences on here.
At the moment it's going to to be a few hundred a month, but it's good to know what my future options are.
She is a Director and Shareholder and as such attends board meetings and has the usual fiduciary duties that this entails.
We pay a monthly amount into her pension in lieu of payment for her responsibilities and we are advised to keep this sensible. HMRC would certainly query an excessive amount.
7184c said:
If an employee I didn’t think you could pay more than the salary.
Can’t you make her a director? If you draw dividends rather than salary then max out the 40k contribution if funds allow as no Corp tax or NI on this.
Do you mean I can only mirror whats she's paid each month? That's the sort of amount I was thinking, but when my accountant said it would not be seen as income splitting I had a lightbulb moment about putting a lot more cash into her pension.Can’t you make her a director? If you draw dividends rather than salary then max out the 40k contribution if funds allow as no Corp tax or NI on this.
I'm maxing out my pension contributions as we want to retire in a couple of years, but she has very little in the way of pensions. Being able to max out her contributions without upsetting HMRC would be great.
98elise said:
We're not married and I was advised when I set the company up not to make her a director and pay dividends (as it could be seen as income splitting)
You could only pay her Dividends if she was a Shareholder. No connection to being a Director, but it would make her a part Owner of the Company.Dividends are a ROI and not income, though you need to be careful about how they are paid as a Company Owner.
Back to your situation, I would keep pension contributions up to her salary level whilst her marriage / Director / Shareholder position is as it is.
dodgydave said:
I think what HMRC don't like is to have remuneration too pension heavy. e.g. £8K salary and £40K pension. Although lawful, it could certainly be challenged as tax avoidance.
But a £8k salary and £8k pension contribution from the Ltd would 'probably' be ok.
Would that be the same for a Director? That's pretty much what I've done this year. I have an income from my company, and some other investments that take me up to the high rate. Beyond that I'm putting cash into my pension (via my company).But a £8k salary and £8k pension contribution from the Ltd would 'probably' be ok.
I did the same last year and my accountant didn't flag it. They generally warn you off any behaviour that looks dodgy to the tax man. I know that they actively check the books as I've had a warning in error (told to avoid monthly dividends when in fact I only take one dividend payment per year).
You work full time and own the company. There should be very little questions asked about your remuneration and pension split.
The issue becomes more acute when someone works part time or not at all as is the case with my wife.
Turning up for a couple of meeting pa does not justify (according to our Advisers) a £40k contribution into a pension pot.
The issue becomes more acute when someone works part time or not at all as is the case with my wife.
Turning up for a couple of meeting pa does not justify (according to our Advisers) a £40k contribution into a pension pot.
Gassing Station | Business | Top of Page | What's New | My Stuff