SIPP contributions direct from my Limited Company

jfjuk

I'm self-employed by my Limited Company, taking a minimal salary of £1002 pcm, plus dividends.  I'm currently paying £524.12 pcm from my personal account into a SIPP. 

Is there a benefit to paying directly from my company, and increase the monthly amount (and backdate for three years)?  Could I set up a workplace pension to contribute to the pension? 

cloud_dog

The most efficient way to get money from the business is to make company payments, from the company account, in to your personal pension.

Albermarle

I'm self-employed by my Limited Company

I am not an expert in this are but I think your either self employed , or you own the company . Not both at the same time ?

HappyHarry

jfjuk said:

I'm self-employed by my Limited Company, taking a minimal salary of £1002 pcm, plus dividends.  I'm currently paying £524.12 pcm from my personal account into a SIPP. 

Is there a benefit to paying directly from my company, and increase the monthly amount (and backdate for three years)?  Could I set up a workplace pension to contribute to the pension? 

Yes, there is a benefit.

If you reduce your salary to make the pension contributions, then the company saves employer's class 1 NIC, and you personally save on employee's class 1 NIC. However, you should make sure that you pay yourself above the Lower Earnings Limit to get National Insurance Credits.

If you reduce your dividends to make the pension contributions, then the company saves on corporation tax (pension contributions are deductible) and you personally could save paying dividend tax.

By making company contributions, you can also use carry forward to make up unused allowances for the last three years, without reference to your salary.

You could set up a workplace pension, or a SIPP. Both will take employer contributions.

dunstonh

I'm self-employed by my Limited Company,

That means you are not self employed.   it's a common mistake though.

taking a minimal salary of £1002 pcm, plus dividends.

That is the second most popular method.  The more popular method is going to the primary threshold rather than personal allowance.   However, there is very little in it.

 I'm currently paying £524.12 pcm from my personal account into a SIPP. 

That is not the most optimal way.  Especially as you are taking a salary to the personal allowance and not the primary threshold.

Is there a benefit to paying directly from my company, and increase the monthly amount (and backdate for three years)? 

Making an employer contribution is the usual way of doing it with shareholding directors.  You are doing it the self employed way.  You cannot backdate the contributions already made though because you made individual contributions and were taxed accordingly.  

Could I set up a workplace pension to contribute to the pension? 

Unless you have employees other than the shareholding directors, there is no need to have an auto-enrolment pension.   Virtually every individual pension out there will take employer contributions.  Including the pension you currently have.

Terron

dunstonh said:

I'm self-employed by my Limited Company,

That means you are not self employed.   it's a common mistake though.

It doesn't mean he is not self-employed. He is employed by his company, but could also be self-employed in another way. I am both self-employeed - making money in my own name, and employed - as a directory of a company I own, though it has not paid me anything for that, just dividends so far.

jfjuk

Thank you everyone for the replies.  

My mistake, I meant to say 'I employ myself through my Limited Company' (I am the only employee of that company).  I also have income from a short term holiday let (AirBnB) property which I believe is allowable rental income and would top up my individual income and therefore increase the total amount I could contribute to a pension.

I guess my thought now is -  I could make the full salary contribution directly from my company, and an additional contribution from my personal income in line with the holiday let income.  Would this then be the maximum I can contribute?

Prism

jfjuk said:

Thank you everyone for the replies.  

My mistake, I meant to say 'I employ myself through my Limited Company' (I am the only employee of that company).  I also have income from a short term holiday let (AirBnB) property which I believe is allowable rental income and would top up my individual income and therefore increase the total amount I could contribute to a pension.

I guess my thought now is -  I could make the full salary contribution directly from my company, and an additional contribution from my personal income in line with the holiday let income.  Would this then be the maximum I can contribute?

The most optimal would likely to be reduce your dividends by the amount of your rental income and then contribute that extra to the pension  directly from the company. That would save corporation tax, dividend tax and a bit of national insurance.

dunstonh

I guess my thought now is -  I could make the full salary contribution directly from my company, and an additional contribution from my personal income in line with the holiday let income.  Would this then be the maximum I can contribute?

No.  Your salary is irrelevant as a limited company shareholding director.   You have the full £40k available (plus any carry forward allowances unsused).    You are better keeping the rental income and taking less from the company and using the company to pay more pension contributions.

jfjuk

Thanks again.  My final question, how do capital gains factor into the equation?  I understand not from property sale gains, but from investments.  Can they contribute to allowances, and to what sort of percentages?

NedS

jfjuk said:

My mistake, I meant to say 'I employ myself through my Limited Company' (I am the only employee of that company).  I also have income from a short term holiday let (AirBnB) property which I believe is allowable rental income and would top up my individual income and therefore increase the total amount I could contribute to a pension.

Just to be clear - your rental income does not count toward your personal pensionable income so it does not count towards the amount of earned income against which you can make personal pension contributions. For the sake of pension contributions it should be ignored.