Husband and Wife Directors Pensions

TWIGLET1234

Hi. I'm a bit of a dunce when it comes to all things pensions! So please bear with me--
1) Just husband and wife on payroll, do I need to start up a auto enrolment pension scheme?
2) Or am I better ( and allowed) to just pay contributions direct from the company into a pension scheme for each of us (up to £40k pa) 
3) Am I right that these are 100% tax deductible?
4) Can anyone recommend a good scheme to set up ?

Thanks

Prism

You may need to let the pension regulator know that you have no staff so you opt out of auto enrolment.

You can then contribute up to £40k each to a pension including a SIPP directly. This is fully tax deductible as it comes out of company profits before calculating corporation tax. 

There are various options - I use AJ Bell Youinvest.

SomeMadeUpName

@TWIGLET1234 I have a similar position on one company, I think the Pensions Regulator will only write to you if you have a PAYE scheme running.  If they do you can just write explaining only 2no on PAYE and both directors, then you shouldn't need an auto enrol scheme (best off out of that if you can).

Pick a SIPP which accepts payments in from your company (most will I think but the only personal experience I have is Vanguard) you can then pay in up to £40k pa as covered by @Prism above.

Depending on how you have your drawings from the business set up (eg sub PAYE salary plus divi) it may be worth paying some into your SIPP from yourself too to get 25% uplift (but this has to come from you post tax money to get that).  The aggregate of personal and company pensions has to stay below £40k unless you have carry over (I think).

You probably have this covered, but remember having a PAYE scheme set up and then paying yourself enough sit just at the point you get NI credits but don't actually pay any NI is a way of adding years of SP entitlement for £0 cost.

TWIGLET1234

SomeMadeUpName said:

@TWIGLET1234 I have a similar position on one company, I think the Pensions Regulator will only write to you if you have a PAYE scheme running.  If they do you can just write explaining only 2no on PAYE and both directors, then you shouldn't need an auto enrol scheme (best off out of that if you can).

Pick a SIPP which accepts payments in from your company (most will I think but the only personal experience I have is Vanguard) you can then pay in up to £40k pa as covered by @Prism above.

Depending on how you have your drawings from the business set up (eg sub PAYE salary plus divi) it may be worth paying some into your SIPP from yourself too to get 25% uplift (but this has to come from you post tax money to get that).  The aggregate of personal and company pensions has to stay below £40k unless you have carry over (I think).

You probably have this covered, but remember having a PAYE scheme set up and then paying yourself enough sit just at the point you get NI credits but don't actually pay any NI is a way of adding years of SP entitlement for £0 cost.

Thanks, for this. We do have a PAYE scheme set up and my husband is paid £736 per month through it. Does he get NI credits on that?
I will be added to PAYE scheme and will take a salary as I am leaving my regular job to move focus onto our own Company.
I guess I will wait and see if we ae contacted regarding auto-enrollment.
Thanks for the other info, I will look into a SIPP. (I assume that is the one that you can pay variable amounts into?...sorry, dunce like I said)

Marcon

TWIGLET1234 said:

SomeMadeUpName said:

@TWIGLET1234 I have a similar position on one company, I think the Pensions Regulator will only write to you if you have a PAYE scheme running.  If they do you can just write explaining only 2no on PAYE and both directors, then you shouldn't need an auto enrol scheme (best off out of that if you can).

Pick a SIPP which accepts payments in from your company (most will I think but the only personal experience I have is Vanguard) you can then pay in up to £40k pa as covered by @Prism above.

Depending on how you have your drawings from the business set up (eg sub PAYE salary plus divi) it may be worth paying some into your SIPP from yourself too to get 25% uplift (but this has to come from you post tax money to get that).  The aggregate of personal and company pensions has to stay below £40k unless you have carry over (I think).

You probably have this covered, but remember having a PAYE scheme set up and then paying yourself enough sit just at the point you get NI credits but don't actually pay any NI is a way of adding years of SP entitlement for £0 cost.

Thanks, for this. We do have a PAYE scheme set up and my husband is paid £736 per month through it. Does he get NI credits on that? Yes. See https://www.gov.uk/national-insurance for more info


I will be added to PAYE scheme and will take a salary as I am leaving my regular job to move focus onto our own Company.
Assuming you're a shareholder, salary + dividends is usually the recommended option

I guess I will wait and see if we ae contacted regarding auto-enrollment.
Depends if you and your husband have contracts of employment. See https://www.thepensionsregulator.gov.uk/en/employers/what-if-i-dont-have-any-staff/directors-and-automatic-enrolment-do-you-have-duties for a clear explanation of the position 

Thanks for the other info, I will look into a SIPP. (I assume that is the one that you can pay variable amounts into?...sorry, dunce like I said)

Yes. There is unlikely to be any merit in following the well-meant suggestion above to make a personal contribution - if the company pays direct, it pays the gross amount and gets corporation tax relief (provided the amount of the contribution is 'reasonable and in keeping with the status of the employee/needs of the business' - in other words, you do actually work for the business and aren't just a passenger operating a tax dodge). 

You sound as if quite a lot of things might be new to you. If you've not yet had a natter with an accountant, now might be the moment....

SomeMadeUpName

"There is unlikely to be any merit in following the well-meant suggestion above to make a personal contribution - if the company pays direct, it pays the gross amount and gets corporation tax relief (provided the amount of the contribution is 'reasonable and in keeping with the status of the employee/needs of the business' - in other words, you do actually work for the business and aren't just a passenger operating a tax dodge)."

@Marcon:
Say the company is doing OK and paying a salary of £8k to each director (enough to trigger the NI credit for SP but not pay too much NI) it is also paying £25k into each directors pension and £2k to each in divi. That £70k empties out the years profit and the £20k take home is enough as the directors have significant investment income from BTL for example, a surplus to requirement even.

Then paying £6,400 into the pensions from that BTL income each would be well worthwhile.

Something similar works for me.

I did say it would depend..........

EDIT: Turns out from what @dunstonh says below the use of £8k for salary is too low, should be nearer to £9.5k but I'll leave it in for the purpose of the illustration.
EDIT#2: Looks like the £8k in the example might be perfectly good after all.

dunstonh

1) Just husband and wife on payroll, do I need to start up a auto enrolment pension scheme?

If you are both shareholding directors with the usual salary to primary threshold and dividends above then no you don't.     If one of you is director and the other is an employee then yes you do subject to earnings.

2) Or am I better ( and allowed) to just pay contributions direct from the company into a pension scheme for each of us (up to £40k pa) 

That is how most directors do it.  It's only weird set ups where it becomes a bit more complicated. (such as the spouse is not holding an officer position but an employee position)

Thanks, for this. We do have a PAYE scheme set up and my husband is paid £736 per month through it. Does he get NI credits on that?

£736 is too low for 20/21 or 21/22.   It should have been £792pm in 20/21.

Mvpharos

Apologies for piggybacking on this thread but I think my question might be of some relevance to the OP too. I have a PSC of which my wife and I are directors and 50/50 shareholders. She doesn't do any work for the company so draws no salary however as a shareholder she receives 50% of the dividends. 

When it comes to pension contributions from the company, does the condition about being "reasonable and in keeping with the status etc" apply to her and therefore it would be inappropriate to make pension contributions to her from the company? Or does the fact that she's a named director and shareholder mean that pension contributions are pernitted? 

SomeMadeUpName

dunstonh said:

£736 is too low for 20/21 or 21/22.   It should have been £792pm in 20/21.

Are you 100%? A quick Google says the LEL is £520pcm, anything over that (x12) is qualifying for SP.

That is Google though.

SomeMadeUpName

@dunstonh

The article also says the optimum is £736pcm for 21/22 (over £520 so qualifying, but just before NI payments kick in).

Where is the £792 figure coming from?

Here's the link:
https://www.pattersonhallaccountants.co.uk/optimum-directors-salary/#:~:text=What is the optimum directors,is £6,240 per annum.

SomeMadeUpName

@dunstonh, I think the £792 is the PT, the trigger for pension years is LEL, and the optimum for directors is between LEL and ST (assuming they want qualifying years).

Link:
https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions