Deferring company pension payments in 22/23

solidpro

Hi All

I run a Ltd company with myself and my wife as directors. AFAIK, an effective rate of 26.5% is applied to profits between £50,001 and £250,000 FY23/24. The company makes enough profit to take a fair amount of our profits into the higher percentage of CT in Spring 2023. We usually ensure the company makes pension contributions to our SIPPs out of it's profits after dividends and salaries, which already takes us into the 26.5% territory (2 max dividends is about £70k in profit). Pension contributions are often £40k each.

When we heard about the increase in CT way back in 2021, we decided we would defer any pension contributions in 2022/23 and pay the (lower, 19%) CT on those amounts instead, leave the money in the company for the FY and then use that 'unused contribution' year in 23/24 to pay up to double the amount of allowable annual contribution.

To put it another way, my assumption is to use company pension contributions to chow into CT on profits when it's at 26.5% rather than 19%.

Now that the CT increase is back on the table, and assuming it's to the same rules as originally passed into law, does anyone spot a flaw in my plan?

Thanks!

dunstonh

I run a Ltd company with myself and my wife as directors. AFAIK, an effective rate of 26.5% is applied to profits between £50,001 and £250,000 FY23/24.

its a big jump isnt it.    I have two limited companies so I only get £25k on each at 19% before the 26.5% band starts.

Now that the CT increase is back on the table, and assuming it's to the same rules as originally passed into law, does anyone spot a flaw in my plan?

The CT increase has been confirmed as been back in place.   And I am holding back pension contributions to make in 23/24 too.   There is the risk that markets will recover by more than that before then but if made early enough in the new year, it shouldnt be too much of an issue (I normally do them in March but will hold that until April 24 and do another in March 25)

solidpro

Well it's good to know I'm not the only one thinking of doing this. Who knows but it could be all the usual places SIPP investment funds tend to be could have some losses to take still. I don't see the harm in waiting another year or so before putting potentially another £160k into our SIPPs. 

This is not a political comment (despite how it looks) but I feel the day the conservative party lose a GE, everything will start to go up. Who knows when that will be.

Notepad_Phil

solidpro said:

...
This is not a political comment (despite how it looks) but I feel the day the conservative party lose a GE, everything will start to go up. Who knows when that will be.

Not sure what you think will start to go up.

But if you're talking about the pound or the stock market then I think you'll find that we're far from being unique in our current circumstances. So although there's no doubt that there is some effect, you'll need to look elsewhere for real salvation e.g. Putin decides to withdraw or China stopping it's zero COVID policies are more likely to help.

Albermarle

This is not a political comment (despite how it looks) but I feel the day the conservative party lose a GE, everything will start to go up. Who knows when that will be.

On Friday the UK stock market crept up a bit, but the main US market dropped 2.5%. The latter is much more important for most investors in the UK .