Company director - Personal Pension

2stixoftwix · 22 March 2018 at 3:43PM

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

dunstonh · 22 March 2018 at 3:58PM

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.

2stixoftwix · 22 March 2018 at 4:12PM

Thanks
So I would literally transfer the £20k dividend straight into my pension

Linton · 22 March 2018 at 4:37PM

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 · 22 March 2018 at 4:46PM

Yes, that's what I meant
Thanks

Prism · 22 March 2018 at 7:58PM

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.