I am a director of a Ltd company that I own, with myself as the only employee. This company pays me a salary, and deducts PAYE tax + 2x NI, using the "Basic PAYE Tools" application from HMRC to inform them about each salary payment. Separately each month I instruct HMRC to take the tax + 2x NI from my company's bank account by direct debit.
However from time to time the company makes a payment to my SIPP - self invested personal pension, for which the company claims a deduction from its profits for the purpose of calculating corporation tax in the corporation tax return completed once a year.
The problem is that in none of these methods of communcation with HMRC can I see a way to tell them that a pension contribution is being made by the company to me.
Does anyone know how I should tell them about this?
Looking in "Basic PAYE tools", it says:
"Do not deduct any pension contributions. Enter the pay in full, and then enter the pension contribution amount in the relevant field below"
Scrolling down, under section: "Employee Pension Contributions", there are two fields:
Value of employee's pension contributions paid under 'net pay arrangement'
Value of employee's pension contributions paid, but not under 'net pay arrangement'
But the contributions the company is making is an employer contribution, not an employee contribution.
So are either of these two fields the correct place to report them?
Secondly the explanation you get when you click on the question mark icon starts in both cases with:
"Enter the amount of any pension contribution being deducted from this employee's pay .."
which is not applicable in my case, because no deductions are being made from the employees pay; the contributions are in addition to the pay, and paid gross.
There is nothing about pension contributions on the P60
Nothing that I can recall seeing on the corporation tax return (other than the fact of having the pension contribution as a company expense, but without telling them who's pension scheme is the recipient of the payment).
Maybe you don't have to inform HMRC? In which case how does HMRC police the two rules (maximum of £40,000 contributions per year, and max £1 million lifetime)?
Thanks
Replies (7)
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They don't police it and you don't need to let them know the gross contributions, although if they are excessive a corporation tax deduction could be denied.
I suggest getting an accountant since paying 2 x NI on your salary sounds sub-optimal.
I hope, therefore, that the wording of your post is just loose and that you aren’t deducting E’er NI from your salary.
I know, I just don't know why you would voluntarily pay it to the government when you could use some of this money to pay an accountant to structure the profit extraction tax efficiently, ensure you are compliant and save you money in the process.