A Pension can be arranged through an An Independent Financial Advisor and a Pension Contribution of up to £60,000 in the year can be paid through the Limited Company, which in turn can offset against the total income to reduce the Profit and in turn reduce the Corporation Tax.
It is important to earn high income to justify the pension contributions but also show a reasonable amount of Salary through the payroll in the company.
As much as there is great benefit to having Pension Contributions, the money contributed can not be accessed at a later stage until the age of at least 55 and even then bear in mind 25% of withdrawal will be tax free but if there is any excess amount withdrawn this will be subject to income tax on the Personal Tax Return at the rate of Basic, Higher Rate and/or Additional Higher Rate
Salary through the payroll will be subject above the threshold to the usual Tax, NI E'es and Ni E'rs and possibly other deductions if applicable such as student loan, however the Net Pay will be received immediately to support the living costs.
The different types of Pensions
- Stakeholder Pensions
- Self-invested Personal Pensions
- Small self-administered Schemes
-Multi-employer Pension Schemes
Ray Tammam of Fairstone Wealth Management 01614254852 can further advice and assist on this.
Similar rules apply as above, however in this case if and when completing a Self-Assessment Tax Return the way that the Tax Relief is provided is by extending the Basic Rate Band by the Gross Pension Paid so more income will be taxed at 20% rather than 40%
e.g. If paid £2,500 in the year then this will be Grossed up to £3,000 and the Basic Rate Band will increase from £37,700 to £40,700
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