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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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!
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.
Thanks
“Income tax relief” and “taking the full £40k out” creates some doubt as to what it is you are intending.
Got it, thanks.
But you’ve misunderstood the £40k allowance. It has nothing to do with salary or PAYE.
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'.