Going Limited-Pension advantages?

Options
Daveinlincoln
Daveinlincoln Posts: 86 Forumite
First Anniversary First Post
in Pensions, annuities & retirement planning
Hi all,

On the advice of my accountant i'm going to become a Limited company and its got me to thinking "What are the perks of doing this regarding pension saving"?

I know I can pay myself dividends but i don't know much else.

My situation is i'm 51, and i'm looking to retire somewhere between 57 and 60 so i'm banging everything into Isa and Pension at the moment,by April next year i should have £160k in a mixture of the both.

I should be just about able to save £32k a year into the pension and £20k into a stock and shares ISA.

When i'm Limited is there anything else i could do?

Comments

  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    Options
    Others more knowledgeable will no doubt comment, most likely that you should speak to your accountant or an IFA urgently as it is often better if you didn't pay into a pension in this situation.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    First Anniversary Name Dropper First Post Combo Breaker
    edited 19 November 2017 at 9:06PM
    Options
    If the company pays into a pension for you (e.g. £40k - it goes in gross) that is an expense for the business. Therefore it reduces the profits and accordingly there's no Corporation Tax to pay on that bit of profits. There's no advantage in paying in more than the company's profit that year.

    Another aspect worth noting is that even if your own earnings are far less than £40k the company can still pay in the £40k for you. (Note that your dividends are part of your income but not part of your earnings.)

    There is a restriction whereby the pension contribution is meant to be defensible as a business expense, in some way proportionate to your role in the business. Your accountant should be able to advise you on that.
    Free the dunston one next time too.
  • ex-pat_scot
    ex-pat_scot Posts: 693 Forumite
    First Anniversary Photogenic First Post Name Dropper
    Options
    Simplistically, if you are running as LtdCo, then it (rather than you) should make the pension contributions into a Personal Pension / SIPP.
    You will need to let the provider know that these are company contributions.
    You can contribute £40k gross each year for you and any employees. This can be helpful if you have a spouse also employed by the LtdCo, as the company can make contributions into their pension.


    Any pension payments made by the company into its employee pension schemes are allowable expenses, deductible against Corporation Tax. Your accountant should be able to talk through and model the effect of your different options:
    - take it all as salary (and incur income tax, Ers NI and Ees NI)
    - mixture of salary and dividends
    - leave retained profits in the company and do Entrepreneurs' Relief when winding up the company
    - take up to £40,000 pa as pension contribution, with therefore a reduced CT bill and lower salary /dividend


    Much depends on your existing situation (eg whether you have pension provision, whether there's a risk of breaching LifeTime Allowance etc)
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608.1K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards