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Director Pension

Company Contribution to Pension

Didn't find your answer?

Think im pretty sure that this is ok but want to check

Currently Director has business ticking over and cash reserves in excess of 40K, not taking a salary but wants to take a chunk of it and put in pension, however for current year this contribution will likley relate to a tax loss, for this financial year, No income tax releif to be claimed on it as no income, but in theory other than potentially being seen as "excesive income" there is no reason for not taking the full 40K out and treating as business expense. (Minimal amounts taken in previous years) and no creditors other than the director.

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By zebaa
14th Jun 2021 17:36

On the limited facts provided it seems likely you are correct.

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By Hugo Fair
14th Jun 2021 18:44

Presumably obvious, but just wanted to be clear that "No income tax relief to be claimed on it as no income" ... is true, but only because you seem to be proposing an Employer's contribution (not a contribution made by the employee).

However, the issue of denuding the cash reserves down to zero (and in a year with trading losses?) raises completely different questions about the state of your Balance sheet ... so, as always, you should be talking to your accountant before doing anything!

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Replying to Hugo Fair:
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By Martymcfly
15th Jun 2021 08:27

Hi this would still leave cash reserves in the business, as it’s a professional services business, there are little to no overheads and or creditors only the directors.

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By Matrix
14th Jun 2021 19:09

What is the question? If you remove the anonymity and use spellcheck and repost maybe I can help as I like pension questions but couldn’t see what you were asking.

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By Calculatorboy
14th Jun 2021 23:26

The contribution should be paid directly by Ltd co. to the scheme.

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Psycho
By Wilson Philips
15th Jun 2021 08:13

“Income tax relief” and “taking the full £40k out” creates some doubt as to what it is you are intending.

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By Martymcfly
15th Jun 2021 08:26

Sorry, I have mis interpreted there is a 40k limit for pension contributions , but that is if director is on paye and takes a similar salary. So far director does not take any remuneration for his work as employed on PAYE elsewhere.
The income tax relief is in reference to the pension company claiming when they receive the funds but as they will be notified that this is a company contribution, there will be no relief.

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Replying to Martymcfly:
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By Tax Dragon
15th Jun 2021 08:32

Is director autoenrolled elsewhere?

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Replying to Tax Dragon:
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By Martymcfly
15th Jun 2021 09:14

Yes but Opted out

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Replying to Martymcfly:
Psycho
By Wilson Philips
15th Jun 2021 08:49

Got it, thanks.

But you’ve misunderstood the £40k allowance. It has nothing to do with salary or PAYE.

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By Hugo Fair
15th Jun 2021 13:27

At the risk of breaking the hearts of those who long for only OP questions to be answered and even then not with advice ... HMRC published yesterday their latest spotlight (this time on using unfunded pension arrangements as tax avoidance via disguised remuneration) https://www.gov.uk/guidance/disguised-remuneration-tax-avoidance-using-u...
I know it's not what OP is proposing but it's an indication of the increased scrutiny of "owner managed companies and their directors", particularly when pension contribs are seen as a way of minimising the tax take from 'withdrawals'.

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