Employee vs employer contribution balance for a limited company

chamberino

I want to contribute £100 a month to my pension from my limited company. Is it better to make this from employer or employee contributions or a mix of the two?

wjr4

Employer because you receive corporation tax relief.

BoGoF

Depends on what salary you are paying yourself.

SonOf

Employer reduces CT and you avoid dividend tax. Plus, you can go to the full £40k p.a. if you wish.

Employee gets tax relief on the contributions but its lower than CT plus dividend tax. You are limited to contribute your salary (which is probably around £719pm if you are like most "own-company" directors).

nigelbb

BoGoF wrote: »

Depends on what salary you are paying yourself.

Isn't the recommendation if you are operating a single employee limited company tax avoidance wheeze to pay the minimum necessary (currently £166 week) to get NI credit but avoid paying NI?

SonOf

nigelbb wrote: »

Isn't the recommendation if you are operating a single employee limited company tax avoidance wheeze to pay the minimum necessary (currently £166 week) to get NI credit but avoid paying NI?

That would be the case in the majority of cases. However, there are a small number of scenarios where some will not stop at the primary threshold but go to the personal allowance. And sometimes they will have a much higher salary. Although I fear many of those on higher salaries are doing so unaware of the tax cost.

Marcon

nigelbb wrote: »

Isn't the recommendation if you are operating a single employee limited company tax avoidance wheeze to pay the minimum necessary (currently £166 week) to get NI credit but avoid paying NI?

The minimum necessary is the LEL (Lower Earnings Limit) of £118 per week. See https://taxaid.org.uk/guides/information/an-introduction-to-income-tax-national-insurance-and-tax-credits/national-insurance/national-insurance-for-employees-and-employers/national-insurance-thresholds

If you earn above the primary threshold (£166 per week) you become liable for NI contributions.

nigelbb

Marcon wrote: »

The minimum necessary is the LEL (Lower Earnings Limit) of £118 per week. See https://taxaid.org.uk/guides/information/an-introduction-to-income-tax-national-insurance-and-tax-credits/national-insurance/national-insurance-for-employees-and-employers/national-insurance-thresholds

If you earn above the primary threshold (£166 per week) you become liable for NI contributions.

I think that the idea is to maximise salary but minimise NI payments.

chamberino

To confirm, my salary is the minimum required to get national insurance credits and the rest is paid as dividends.

Sounds like paying all the pension from the company as employer contributions is the way to go then.