Directors Pension contributions?

Tax relief on directors pension contributions

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Please can anyone advise how to implement the Limited Company paying into the directors pension pot?

As I understand it rather than take a dividend a director can put up to £40,000 pa profit into a pension and this can be a taxable expense to the Company.

 

 

 

Replies (5)

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By mikeyban
15th Jul 2021 21:16

The company must contract with the pension provider for it to be an ers contribution…

Also should be enough co taxable profits to obtain the ct relief …

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Replying to mikeyban:
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By David Ex
15th Jul 2021 23:03

mikeyban wrote:

Also should be enough co taxable profits to obtain the ct relief …

Is there any issue with demonstrating that a sizeable (one off?) pension contribution is wholly and exclusively for the purposes of the trade?

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By Matrix
16th Jul 2021 07:18

The pension is deductible only when paid so advise clients that the funds need to clear by the end of the accounting period. I don’t see why there have to be taxable profits, the deduction could create a loss.

Per above, the pension provider needs to record it as an employer contribution so no basic rate tax is claimed.

Per above, the whole remuneration package has to be commensurate with their duties.

Just make sure that you make it clear that you are not providing financial advice.

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By Tax is always taxing
16th Jul 2021 09:52

Its not difficult to implement, you obviously need a pension either already set up or for a new one to be created. But realistically you are now getting into financial advisor territory, which you want to stay clear of if not qualified.

Advising on allowances etc is as far as I would go, and recommend a good IFA you work with as they should be taking proper advice if they are going to be putting in at that level annually.

And don't forget, you can go back to previous years and use any unused contribution allowances, so worth discussing this with the client (providing a pension exists of course).

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By moboffsol
16th Jul 2021 10:39

Thank you all for your invaluable advice. I will also advise my client to seek advice from a financial advisor too.

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