Company director - Personal Pension

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2stixoftwix
2stixoftwix Posts: 61 Forumite
in Pensions, annuities & retirement planning
I am a director of a small company and have a Legal and General personal pension
I draw a small salary of £8100 and take the rest in dividends (under £20k)

I know I can put in £6528 personally and the tax relief will add to make it £8100

I also understand I can add money from the company
How would I do this... Do I just add it as a lump sum and record it on the company accounts/ self-assessment or do I need to open up a new pension.
I'm a bit confused as to how it works
Thanks

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  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    I know I can put in £6528 personally and the tax relief will add to make it £8100

    But you wouldnt as you are a director and that is a very inefficient way of doing it.
    How would I do this... Do I just add it as a lump sum and record it on the company accounts/ self-assessment or do I need to open up a new pension.

    You can do it as an ad-hoc single or regular. It is an employer contribution from the company.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • 2stixoftwix
    2stixoftwix Posts: 61 Forumite
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    Thanks
    So I would literally transfer the £20k dividend straight into my pension
  • Linton
    Linton Posts: 17,162 Forumite
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    edited 22 March 2018 at 4:39PM
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    2stixoftwix wrote: »
    Thanks
    So I would literally transfer the £20k dividend straight into my pension

    No - you cant transfer your dividend received from the company as it then becomes your contribution which isnt what you want. The company should pay the money directly into your pension as an employer contribution which counts as an expense against profits for company taxation. Of course it may mean that the company can no longer afford to pay you the full dividend but that is another matter.
  • 2stixoftwix
    2stixoftwix Posts: 61 Forumite
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    Yes, that's what I meant
    Thanks
  • Prism
    Prism Posts: 3,803 Forumite
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    Ensure that your pension can accept company payments - one of mine doesn't. Your payments will reduce your corporation tax bill (and you won't pay dividend tax) but you won't receive the 20% tax back that you would from paying in as an employee.
  • System
    System Posts: 178,094 Community Admin
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    And remember there is no salary limit to contributions with employer contributions, only the annual allowance, plus any unused carry-forward
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