Employer Pension Contributions

Limit on Employer Contributions on a basic salary

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I have a client who run a small Limited Company. Husband and wife who draw £12.5k salary each and then take dividends.

Is there a limit on the level of pension contributions the Company can make on their behalf - I.e. limited to their salary amount?

Replies (9)

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By David Ex
14th Feb 2024 23:19

I vote no.

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By Leywood
14th Feb 2024 23:48

What does your research indicate?

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By Matrix
15th Feb 2024 05:33

The contributions would not be limited to NRE but the usual annual allowance limits would apply. I would search previous threads.

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By accountaholic
15th Feb 2024 13:22

Maximum £60,000 in a year, but subject to taper restriction if a high earner. You may also be able to use un-used allowances from the last three years.

Remember too that both employer and employee contributions count towards the annual allowance.

Also consider Money Purchase Annual Allowance if they have already accessed their pension(s).

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paddle steamer
By DJKL
15th Feb 2024 13:40

Apart from specific pension contribution limits, the limit might be more re W & E and the global remuneration package being paid, but very much doubt an issue with your H & W team (years ago did have one challenge re salaries for offspring, family SSAS contributions etc, but this was back in the day when vast contributions were made based on final salary actuarial calculations/contributions)

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By mattydav
16th Feb 2024 09:17

Plenty of HMRC 'guidance' in their manuals. specifically BIM46035
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46035

'You should accept that the contributions are paid wholly and exclusively for the purposes of the trade where the remuneration package paid in respect of a director of a close company, or an employee who is a close relative or friend of the director or proprietor (where the business is unincorporated) is comparable with that paid to unconnected employees performing duties of similar value'

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Replying to mattydav:
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By FactChecker
16th Feb 2024 13:52

The problem (aside as you say of it merely being HMRC 'guidance') is that they seem to restrict the comparison of 'the remuneration package' to a director (or ..) vs an 'unconnected employee'.

So where, as in OP's case, directors are also the shareholders and opt to take the majority of payment via dividends ... are those dividends part of the comparable remuneration package (nominally) available to a mere employee?

Of course the majority of OMB and H+W businesses seem to be blissfully unaware of any distinction between being a shareholder, a director or just the owner!

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By JD
16th Feb 2024 14:23

Given what is being asked and the inevitable complexities, perhaps you and your clients would be well advised to take advice from a suitable IFA . - albeit imho I tend to find that IFAs find anything involving companies a bit of a challenge.

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Replying to JD:
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By FactChecker
16th Feb 2024 15:28

" I tend to find that IFAs find anything involving companies a bit of a challenge."

Having been badly burned (putting it mildly) on all 3 occasions in my life that I've had to appoint an IFA, I'd say that they find almost anything "a bit of a challenge" other than helping themselves to your wallet.
[I know that doesn't help, and obviously runs counter to my usual encouragement to 'appoint a professional' ... but the ones I met made the Krays look charitable!]

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