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Pension contributions and any other alternatives

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    Pension contributions and any other alternatives

    My company bank balance has increased nicely as I have not needed to take any dividends as my personal accounts are healthy enough.

    Given that I am not too far away from being 55 when I can access the funds through a pension, is there anything I should be considering around closing the company if IR35 goes the wring way in the upcoming months as opposed to just whacking to the limit from the company funds into my personal pension? I cannot see myself needing any of it until I can access it aged 55 so I have some flex to play with.

    #2
    Bear in mind the contribution limit for tax efficiency is £40k per year. You can also whack in £40k for each of the previous three years although you must have been a member of an approved pension scheme during the years you are backdating the payment to - so you can't just join a pension scheme today and use the previous three years' allowances if you weren't in a scheme back then.

    if the amount you end up wanting to put in now exceeds your company profits in your company's current reporting period, you might want to take some advice form your accounting re getting CT relief from the previous company tax year, if available.

    Comment


      #3
      Originally posted by Amanensia View Post
      Bear in mind the contribution limit for tax efficiency is £40k per year. You can also whack in £40k for each of the previous three years although you must have been a member of an approved pension scheme during the years you are backdating the payment to - so you can't just join a pension scheme today and use the previous three years' allowances if you weren't in a scheme back then.

      if the amount you end up wanting to put in now exceeds your company profits in your company's current reporting period, you might want to take some advice form your accounting re getting CT relief from the previous company tax year, if available.
      Useful, thank you. I have already been making contributions into a personal pension over the last few years but been rather lax lately largely due to not being so sure about a couple of things, but now I am 46 it's making more sense to put into pension than a 10 year bond! Getting old already - it's scary....

      Comment


        #4
        Yeah, I'm 49 next month and going through the same thoughts!

        Remember the minimum age for drawing PP benefits will rise to 57 in 2028. Sounds like that might affect you if you're 46 now...

        Comment


          #5
          Originally posted by Wilmslow View Post
          My company bank balance has increased nicely as I have not needed to take any dividends as my personal accounts are healthy enough.

          Given that I am not too far away from being 55 when I can access the funds through a pension, is there anything I should be considering around closing the company if IR35 goes the wring way in the upcoming months as opposed to just whacking to the limit from the company funds into my personal pension? I cannot see myself needing any of it until I can access it aged 55 so I have some flex to play with.
          why??????????

          You might not need the dividend, but 7.5% tax is not to be sniffed at...
          And whilst pension is tax-free to a point, it's not completely tax free.

          Let's say you put £40k into a pot now.
          You can have 25% of the pot (let's call it £100k) tax free. So that's £25k tax free. The rest you'll pay 20% on (assuming not entering the higher rate). So if you want your £40k... You'll pay 20% on the £15k (that's £3k tax).

          By coincidence, if you took £40k in dividends, you'd still pay £3k tax, but will have the money now, and still be able to take 25% of your pension pot tax free (at age 55).
          See You Next Tuesday

          Comment


            #6
            Originally posted by Lance View Post
            why??????????

            You might not need the dividend, but 7.5% tax is not to be sniffed at...
            And whilst pension is tax-free to a point, it's not completely tax free.

            Let's say you put £40k into a pot now.
            You can have 25% of the pot (let's call it £100k) tax free. So that's £25k tax free. The rest you'll pay 20% on (assuming not entering the higher rate). So if you want your £40k... You'll pay 20% on the £15k (that's £3k tax).

            By coincidence, if you took £40k in dividends, you'd still pay £3k tax, but will have the money now, and still be able to take 25% of your pension pot tax free (at age 55).
            I was thinking about the corporation tax relief from making the pension pot move..... Essentially my understanding is that putting the company money into a pension is unbeatable.

            Comment


              #7
              I would certainly be taking dividends up to the top of the standard rate income tax band before putting anything into a pension.

              Comment


                #8
                Originally posted by Wilmslow View Post
                I was thinking about the corporation tax relief from making the pension pot move..... Essentially my understanding is that putting the company money into a pension is unbeatable.
                only up to a point, and only if you've considered the whole situation.
                Always take the 7.5% though IMO.
                See You Next Tuesday

                Comment

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