Financial Advice required for Owner of Limited Liability Companyr

Are you also both directors of the company? If so, the company can pay up to £40,000 pa into a pension for each of you. you don't get tax back from HMRC, but the company would save on its corporation tax. Have you asked your accountant what would be most efficient?

Very generally....

Typical remuneration for company directors/shareholders of own company is to pay themselves sufficient salary to qualify for NI credit but without paying NI. Also to use personal tax free allowance. For most this is just below the NI primary threshold (currently £719 per month).

Pension rules allow you to pay up to the max of your earned income (or £40k, whichever is the greater) into a pension and receive tax relief. This apples whether or not you have paid income tax on the earned income.

So, if each of you takes (say) £715p.m. in salary then you will not pay NI or income tax, will each qualify for a full year NI credit toward state pension, and will be able to claim tax relief at 20% on the full £715p.m. if you then pay it into a pension. This increases the pension contribution by 25%.

The salary can also be offset against corporation tax thus saving another 19%.

The balance of remuneration is usually sourced from dividends (again, for tax reasons).

Additional pension contributions may be paid directly from your company account into the pension. These will count as 'employer's contributions' and, as has been said, can be offset against corporation tax but will not reduce your personal income tax liability. Nor will they be eligible for a tax uplift.

The above may not be optimum for your circumstances so the advice of an accountant and IFA should be considered.

Always ensure that you have an emergency cash fund of around 6 months expenses before making other savings/investments. This is your insurance against the unforeseen. After that, pensions are by far the best investment wrapper tax-wise, and especially for small limited company owners. Any investments held outside a pension should be ISA-wrapped as much as possible. Cash is currently best left unwrapped in order to receive the best retail interest rates. Income, dividend and savings tax allowances are all relevant to your circumstances and it will be to your advantage to understand them, and know how they relate to your situation.