Pension and corporation tax question

[9005rpm]

Evening all,

I have a pension and corporation tax quandry and i'd appreciate some of the wisdom on here.

If we assume that I have no remaining pension annual allowance, whether from this year or prior years. I have £100k in my company which is not doing much. I could:

1. Pull it out as dividend and invest it outside of my pension. I then pay tax on the growth.
2.Pull it out as dividend and pay it into my pension as a personal contribution. In that event i gather i have to pay a tax charge of 45% as i have used up my annual allowance. Presumably that means i take the £100k, pay dividend tax, that leaves me with £60k in round numbers which if i then dump into my pension and i pay the 45% tax on the £60k. So two tax events essentially and a bad idea.
3. My company pays the £100k into my pension, and i pay the 45% tax on the £100k, but (I think) the company gets a corporation tax saving on the £100k. But i end up with the £100k in my pension where it can achieve tax free growth and a £25k reduction in my corporation tax bill.

1. 3 seems like by far the best option, but i am not sure if my logic or indeed my understanding is correct.

Does anyone have any knowledge to share?

Thanks!

[trickywoo]

I don’t think you get any tax relief on excess contributions, corp or personal.

It would also be added to your personal tax calculation.

[Mogul]

If that £100k of taxed profits was hard won and not recurring, you could simply wait until 6/4/25 if you wanted to park it in your pension (assuming nothing changes before then).

If is likely to be a recurring/growing ‘problem’, and you are allergic to paying tax then you could think different and look at various tax advantaged investments but there be dragons…

[Panamax]

The tax situation is broadly irrelevant. Unless you sell the company and can get some low rate CGT the fact is you're going to be paying tax one way or another.

Whichever way up you hold it, pension cumulates tax free once the cash is in there. Which is nice.

So the real question becomes, "How old are you?"

If you're an old-timer just take the div' and spend the cash on coke & hookers while you can.
If you're a young upstart take the div' and invest it in pension, then sit back for the long run.

It could be worse - you could be on full PAYE.

[9005rpm]

Thanks for the responses!

It is hopefully recurring revenue, and is taxed profits. I'm not really interested in any other tax advantaged investment plan for these funds, just a steady pension return.

I'm early 50s and won't need the money for anything else. My wider earnings mean I only get the minimum ongoing annual allowance of £10k so taking it as a dividend and then putting it into the pension won't work as i think that gives me two tax events - at the point of declaring the dividend and also at the point of paying into the pension. I was hoping to create a single tax event by the company paying straight into the pension and then just having to pay the tax in addition for making a pension payment in excess of allowance. If i could get 25% CT relief on the payment, all the better!

Cheers!