The Loan Charge and Pensions and Settlement...

[prozak]

Hi All,

I am awaiting feedback from accountant and a LC expert, but in the meantime I was wondering whether people have worked out LC v Settlement calculations including pensions?

I know nothing about pensions so in the dark a little.

I am currently in FTE and have signed up to a pension recently. So I am trying to find out the difference between settlement and risking the LC if I start putting the maximum into my pension in 2019/2020 when the LC takes effect.

In the years in question that i had the loan (2 half years) i used up all my allowances with income and dividends also - in 2019/2020 if we includ my loans I will be well into the "additional rate" level.

Anyone had advice in this regard?

[prozak]

Doing some reading.

Seems the level of "income" for the year would reduce the annual allowance to £10k and then anything over that is taxed at the upper amount.

So maybe not a viable strategy.

[Albert49]

Tax year 2018/19

The loan charge classes your loan amounts as income in this tax year (2018/19), so any pension contribution to offset it needs to be made this year as well. A pension contribution will offset the LC tax due for a closed tax year, but may not if the tax year is still open, you should probably take advice if your years are open.
Loan Ranger has posted an excellent guide in this forum explaining how much you can contribute.

https://www.contractoruk.com/forums/...hlight=pension

[prozak]

The loan charge classes your loan amounts as income in this tax year (2018/19), so any pension contribution to offset it needs to be made this year as well. A pension contribution will offset the LC tax due for a closed tax year, but may not if the tax year is still open, you should probably take advice if your years are open.
Loan Ranger has posted an excellent guide in this forum explaining how much you can contribute.

https://www.contractoruk.com/forums/...hlight=pension

Thanks.

Yes I just realised that! So I would have to up my pension immediately!

[Albert49]

Thanks.

Yes I just realised that! So I would have to up my pension immediately!

I would suggest that you wait just in case by some miracle the Loan Charge is changed/ not bought in, you have until end of March 2019 to contribute.

[prozak]

I would suggest that you wait just in case by some miracle the Loan Charge is changed/ not bought in, you have until end of March 2019 to contribute.

I've recently moved to FTE, so not sure how I would do that with the company scheme.

But the way I see it - it's savings either way so contributing this year is a benefit in the long term anyway.

[Albert49]

SIPP

I've recently moved to FTE, so not sure how I would do that with the company scheme.

But the way I see it - it's savings either way so contributing this year is a benefit in the long term anyway.

If you do not already have a seperate pension (eg a SIPP) that has been open for the previous 3 years , then the amount you can contribute is limited to £40,000 (or 80K if you had your SIPP pension open last year etc.), MINUS any contributions already made to a pension, since you are in a company scheme any contribution you or your employer make to that this year should be deducted from the 40k
eg FTE Salary £50K, employer contributes 10% (5K), you contribute 5% (2.5K), contribution you can make to a SIPP this year = £32.5K

[prozak]

If you do not already have a seperate pension (eg a SIPP) that has been open for the previous 3 years , then the amount you can contribute is limited to £40,000 (or 80K if you had your SIPP pension open last year etc.), MINUS any contributions already made to a pension, since you are in a company scheme any contribution you or your employer make to that this year should be deducted from the 40k
eg FTE Salary £50K, employer contributes 10% (5K), you contribute 5% (2.5K), contribution you can make to a SIPP this year = £32.5K

Thanks.