Self employed on universal credit support, need pensionm what are the options?

Grumpy_chap

seatbeltnoob said:

Grumpy_chap said:

seatbeltnoob said:

kaMelo said:

seatbeltnoob said:

kaMelo said:

Are you sole trader or limited company?

both.

Around 80% of my income is through the ltd company. around 20% of my income is sole trader (passive income from blogs).

But for UC it doesnt matter everything is rolled into one.

As a Ltd.co your company can make employer contributions on your behalf. The contributions are an allowable business expense for UC and can be a more tax efficient way of making contributions into your pension.

its just needlessly complicated for you to do this as tyour own employer - added layer of beauracrcy. As an employee you opt out. Also SIPP are by far the best cost saving option as your management fees are a lot less.

I disagree.

As a Ltd Co owner / Director, the most tax efficient way to make pension contributions is directly from the Ltd Co as EMPLOYER contributions to SIPP.  That avoids corporation tax, NI (-er plus -ee), income tax on the amount contributed.
It doesn't matter about auto-enrollment as that is irrelevant for owner / Director Ltd Co.

That is the normal base case.  I am not knowledgeable as to whether claiming UC changes that preferential tax position such that an alternative means of pension contributions becomes more effective.  Hopefully another member of the forum will be able to comment.

(I write as Ltd Co owner / Director.)

I thought the income tax is returned so you would just pay the equivalent amount through PAYE as an "opted out" employee. Put it through SIPP yourself and get tax rebate?

isn't that how it works?

I guess I need to do some more reading. I thought SIPP cannot be paid via workplace - I thought the name suggested that it's something an individual puts away themselves.

I was thinking, this is actually a little more complicated than I first suggested.  

If your taxable income is below your personal allowance, then taking drawings from the Ltd Co and making personal pension contributions may be more tax efficient.

I don't think that applies in your case.

Your comment that " the income tax is returned so you" is not quite correct as it works differently.  If anyone individual makes pension contributions, say £100, that amount is 'grossed up' so the pension fund receives £125.  That is how the tax relief works, rather than the income tax being returned to you.

There are limits on maximum contributions.  I assume that AA will not be a concern for individuals claiming UC, but earned income may be a consideration.

If the pension contributions are made by the Ltd Co, there is no 'grossing up' because no tax (corporation tax, NI, income tax) has been paid in the first place.  It also means the earned income limit is not relevant.

I am not knowledgeable on how UC is affected by pension contributions from Ltd Co.  Relievable contributions should be allowed as valid expenses but I am unsure how this needs to be reported as UC looks through the veil if the Ltd Co.  I am sure others will be able to comment on this aspect with better knowledge.

Also, as this is your own Ltd Co, the reference to 'opted out' is not correct as auto enrollment does not apply.