Pension Contribution Limit

wary

I'm a contractor who has their own limited company, which means that I have the option to make pension contributions direct from the company and I believe this is more advantageous than paying them personally.

I've checked on limits per tax year, which is 50K reducing to 40K, with a carry-over of unused limit for 3 years, and contributions cannot exceed one's gross salary.

For making contributions from my limited company, I presume the "40K per tax year" limit will apply. However:
- is this limited restricted by the level of my gross salary?
- is this limit also increased by unused contributions from previous tax years?

My wife is a sole trader. Not sure exactly how this works but I believe that once she has written off whatever she can to expenses, the remaining income is effectively treated as gross salary and subject to tax & NI. Can she make pension contributions from her gross income, with the remainder (after expenses) being treated as her gross salary - hence avoiding NI as well as tax?

Triumph13

I don't know about the sole trader rules, but in your own case as an employee of the company the 'cannot exceed one's salary' bit only applies to employee's contributions, not to employer's ones.

mania112

employer can make contributions up to 100% of salary or £40k (whichever smaller).

employee (if Ltd) can make contributions up to £40k

mania112

^ Unless you squeeze one in before 5th April then the limit is £50k

wary

mania112 wrote: »

employer can make contributions up to 100% of salary or £40k (whichever smaller).

employee (if Ltd) can make contributions up to £40k

Is that the right way around? Unless I've misunderstood then that differs from what Triumph13 has just said and indeed what I perceived the rule to be.

mania112

haha! April fools. A deliberate mistake to see who was paying attention.

Yes, I mixed up Employer and Employee.

Essentially an employee can pay more than the employer earns. But this overpayment may need to be justified (although in reality it's unlikely anyone at HMRC will notice).

wary

mania112 wrote: »

haha! April fools. A deliberate mistake to see who was paying attention.

Yes, I mixed up Employer and Employee.

Essentially an employee can pay more than the employer earns. But this overpayment may need to be justified (although in reality it's unlikely anyone at HMRC will notice).

Thanks.

Should that read "Essentially an employer can pay more than the employee earns"?!? LOL

wary

Does the carry-over from the past 3 years apply to contributions I make from my limited company (of which I'm an employee), does anyone know? So for 2014/15, will my limit be £40K plus £150 (minus any contribution I've made in the last 3 years) as a carryover?

davide691

@ Wary - Yes: £50k limit for prior 3 years remains intact. £40k for 2014/15 onwards