Pension Advice - Mid 30s

greensmoker

Hi and thanks for reading.

My husband and I are both mid 30s. We recently set up a limited company from which I draw a monthly salary of £565, whilst my husband does not draw a wage so that we can build up some money in the business to build it up further.

Now I'm wondering:

1. Are we required to set up a Pension Scheme?
2. If we were to set up a Pension Scheme for our business and put money into it, what would my payslip show? still the same £565, or that amount plus whatever I put into my pension?
3. We currently receive Tax Credits. Would paying money into a Pension Scheme effect that in any way?
4. As we earn below the tax threshold, how much would we be able to pay into a pension scheme yearly?

Any advice would be appreciated.

many thanks

dunstonh

1. Are we required to set up a Pension Scheme?

not yet (unless you employ people)

. If we were to set up a Pension Scheme for our business and put money into it, what would my payslip show? still the same £565, or that amount plus whatever I put into my pension?

Nothing would go on your payslip as you wouldn't make contributions that way as its not tax efficient.

3. We currently receive Tax Credits. Would paying money into a Pension Scheme effect that in any way?

No (technically personal contributions could increase tax credits but employer contributions would not but they would avoid NI).

4. As we earn below the tax threshold, how much would we be able to pay into a pension scheme yearly?

£50,000 a year each dropping to £40,000 each from next tax year.

greensmoker

Thanks so much for your response. I really appreciated your clear answers.

So basically, I set up a Pension Scheme for the business and pay into it direct from the business.

Do I have to pay in a fixed amount per month / year or, since I own the business, can I choose how much I pay in?

atush

You can do it monthly or annually.

As a limited Co, do you have an accountant for your books? he could help you.

BTW, you are living on 565 a moth plus tax credits- how do you do it lol

xylophone

http://www.holderandcombes.co.uk/our-services/retirement-planning/directors-pensions/

I found this when googling - advice from this type of firm might be what would help?

greensmoker

Thanks all for your advice.

So say I receive £565 per month and then put £250 on top of that into my pension, totaling £815. Then I submit RTI to HMRC my monthly payment, what amount do I submit? £565 or £815?

Sorry if I seem to be repeating myself, just want to get this clear.

Thanks in advance for your responses.

dunstonh

So say I receive £565 per month and then put £250 on top of that into my pension, totaling £815. Then I submit RTI to HMRC my monthly payment, what amount do I submit? £565 or £815?

You wouldnt do anything, Your accountant would record it as a business expense as its a payment from the company and it would reduce your corporation tax.

greensmoker

So I assume then that there is no National Insurance to pay either as my salary kind of remains at £565. Am I correct?

ozzage

Yes that's correct. Paying employer contributions has nothing to do with your payroll at all, in reality.

You just pay a gross amount into the pension from the company bank account and (as said above) it goes in to the books as a valid business expense.

So not only do you not pay income tax OR employee's NI OR employer's NI you ALSO don't pay any corporation tax! Highly recommended

It's very simply to set up a company pension for your own limited company. I have one with Hargreaves Lansdown (not a recommendation, just an example and if you expect to end up with a large pot there are cheaper options) which I did myself and on top of monthly direct debits I can pay one-off contributions (albeit by CHEQUE!) whenever I want as well. It's all very easy.

atush

That is one of the best things abt executive pensions via a LC.

No nics, employer/your company or you. Reduces profits for corporation tax. Not income as you didn't receive it. Magic

greensmoker

Thanks so much for your responses.
So I'm definitely keen to get this set up asap. Is it a SIPP I need or must i set up a specific pension scheme for a limited company?