Improve on £2880 pension input when effectively retired

artyboy

Just more idle thought on my part. You're retired and using the £2880 --> £3600 pension trick. What's to stop you setting up a limited company, you as sole director/employee, capitalising it just enough to pay you a salary of £12,570 per year, then making the same gross payment into a SIPP - hey presto... £2500ish in tex relief (that was never paid in the first place).

Im guessing that HMRC might view this as a form of aggressive tax avoidance (at least) if the company wasn't really serving any other operational purpose, and there would of course be a bit of an overhead in company admin. Or is this entirely legal?

Dazed_and_C0nfused

How much employer NI would be payable?

Marcon

artyboy said:

Just more idle thought on my part. You're retired and using the £2880 --> £3600 pension trick. What's to stop you setting up a limited company, you as sole director/employee, capitalising it just enough to pay you a salary of £12,570 per year, then making the same gross payment into a SIPP - hey presto... £2500ish in tex relief (that was never paid in the first place).

Im guessing that HMRC might view this as a form of aggressive tax avoidance (at least) if the company wasn't really serving any other operational purpose, and there would of course be a bit of an overhead in company admin. Or is this entirely legal?

It would fail on a number of counts. General anti-avoidance provisions for one.

Albermarle

 £2500ish in tex relief (that was never paid in the first place).

In any event there is never a  direct link between how much tax you pay ( or do not pay ) and how much tax relief you can get.

Tax relief is based on your earnings , whilst the tax you pay depends on your personal allowance, other income etc 

Somebody earning £12K can get tax relief on all of it,  even if they paid zero tax on it, as long as the full personal allowance.

The issue with your plan is that you are falsely creating the earnings, not that you did not pay any tax .