I am a director of a company. Making yearly profit of around 85,000. My accountant said that i should contribute to pension through company since it will save company tax. Is it true and how?
Please explain. Thanks
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Agree with the above. Furthermore if you don't trust your accountant's advice without getting second opinions on everything they say, you probably need a new accountant - one in whom you can have confidence.
yes its true
The contribution is an expense of the company thereby reducing the taxable profit
Simplistically, yes
Yes, company pension contributions can save corporation tax but that doesn't mean the company should make them or that it will, in overall terms, be advantageous for you.
The decision must be made taking account of a host of factors including your current and likely future tax/remuneration level and structure (NISAs from net pay alternative?), your relationship to the company (i.e. shareholding), and need of the company for future funding (I have seen a recommendation made to make large pension contributions to a profitable company which had the fortunate position of sales going through the roof but the unfortunate position of negative cash flow i.e. their big cash pile was going to be gone in around 8 months and they would wouldn't have been able to pay the wages!)
pension paid by Company
Set up a Small Self Administered Scheme-(SSAS). This will not only save tax but offer a range of flexible planning opportunities going forward such as providing cash flow through loans and funding for commercial property purchase. You will not regret it!