Ltd Company contributing to SIPP

lulabelle1

I'm currently employed by a Limited company that I own part of. I therefore currently receive a PAYE salary of 11,500 and the rest in dividends.

I like to keep my net earnings under the £50k mark so that I can keep my child benefit etc. I therefore currently contribute £11,500 (£9,200 net) to my SIPP. This is the only pension that I have.

My question is, can the limited company pay additional contributions to my SIPP? I'm slightly confused as I understand that the annual contribution cap is £40k, however, it's capped at the PAYE salary, which is £11,500 - I wasn't sure whether this applied to personal contributions only or whether the company was able to make additional contributions?

I want to be able to take additional monies from the company this tax year but want to be as tax efficient as possible and not lose my entitlement to child benefit.

Thanks in advance

Marcon

Company contributions aren't limited to your salary so yes, they can make additional contributions on your behalf. HMRC require these to be 'reasonable' having regard to your role within the company and your overall remuneration. If you actually work for the company (i.e. do something rather than just being a 'notional' employee) they don't get too excited about how much, provided it isn't ridiculous.

From your post, it looks as if you are paying your own SIPP contribution. If the company paid part of this by salary sacrifice, you could keep your entitlement to NI credits without you or the company actually having to pay NI.

dunstonh

I'm currently employed by a Limited company that I own part of. I therefore currently receive a PAYE salary of 11,500 and the rest in dividends.

Whilst some accountants do it that way, the dominant method is to only take a salary to the primary threshold (£8424) as you pay no NI that way but still qualify for NI. Then take dividends on the rest. It may be worth finding out why your accountant is using the personal allowance for salary and causing you to pay NI.

I like to keep my net earnings under the £50k mark so that I can keep my child benefit etc. I therefore currently contribute £11,500 (£9,200 net) to my SIPP. This is the only pension that I have.

That is an inefficient way of paying into the pension when you are a shareholding director.

My question is, can the limited company pay additional contributions to my SIPP?

In the majority of cases, shareholding directors should only be making company contributions.

I'm slightly confused as I understand that the annual contribution cap is £40k, however, it's capped at the PAYE salary, which is £11,500 - I wasn't sure whether this applied to personal contributions only or whether the company was able to make additional contributions?

You can have £40k paid in but only via the company.

You need to look at your salary payment and how you pay the pension.

lulabelle1

dunstonh wrote: »

Whilst some accountants do it that way, the dominant method is to only take a salary to the primary threshold (£8424) as you pay no NI that way but still qualify for NI. Then take dividends on the rest. It may be worth finding out why your accountant is using the personal allowance for salary and causing you to pay NI.

Understood. To be fair to our accountant, it is ourselves that have set the PAYE salary. It's not the most efficient, but for one reason and another it gives us a family income (coupled with my husbands PAYE) that we need to manage on should we not be able to draw any dividends.

dunstonh wrote: »

That is an inefficient way of paying into the pension when you are a shareholding director.

I totally agree. Unfortunately one of the major shareholders of the Company is not as well versed on tax efficiencies, pensions etc etc and will only agree to and end of year Company contribution depending on Company performance (despite the NI savings and so on)

dunstonh wrote: »

In the majority of cases, shareholding directors should only be making company contributions.

I am also a Director of the Company. This is my sole Company/Directorship and full time job.

dunstonh wrote: »

You can have £40k paid in but only via the company.

Ok, so I can continue to contribute directly to my SIPP up to the value of my PAYE and then the Company can make contributions taking the total to £40K?

Thank you for taking the time to provide feedback. Much appreciated