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Directors’ Pension Contribution for Tax efficient Company Profit extraction

Directors’ Pension Contribution for Tax efficient Company Profit extraction

What Is It?

Many Directors of their own limited companies pay themselves a significant proportion of their income via dividends, which means that they cannot make individual pension contributions on this proportion of their income. However, they may be able to set up an employer’s contribution from their own company, on which there is no upper limit on the amount they can contribute.

An employer’s contribution is paid gross. It is allowable as a business expense and the employer will receive tax relief against corporation tax.

The pension will provide tax-free growth on future gains.

The Director’s pension may also be passed on to their chosen beneficiaries free from Inheritance Tax.

Who are they potentially suitable for?

  • Directors, who are seeking to extract cash from the company in a tax-efficient manner.
  • Small Business Owners and Entrepreneurs who pay themselves through dividends and have limited pensionable earnings, as their business could obtain tax relief on the gross contribution.
  • Individuals seeking tax-efficient savings, for retirement.

How can we help?

We can calculate the maximum permitted employer contribution using unused reliefs from the last 3 years.

We can help you explore the opportunity to make company pension contributions, provide in-depth research and personal recommendations to suit your individual circumstances.

What should I do next?

If you would like us to advise you on Tax allowances you may be entitled to, please contact Nick Chaitow in Critchleys Financial Planning.

M: 07971 494050

 


First Published 27 September 2021​
Last Updated 27 September 2021​

27 September 2021​
First published. 

This is for information purposes only. No action should be taken without seeking specific professional advice. Thank you.

*Critchleys Financial Planning LLP is an appointed representative of Quilter Financial Services Limited (FCA Register number is 440703) and Quilter Mortgage Planning Limited (FCA Register number 440718), Wiltshire Court, Farnsby Street, Swindon. SN1 5AH, which is authorised and regulated by the Financial Conduct Authority.

The permitted business of Quilter Financial Services Limited and Quilter Mortgage Planning Limited is advising on and arranging pensions, investments, mortgages, life assurance and general insurance.

You can check this on the FCA’s Register by visiting the FCA’s website www.FCA.org.uk/register or by contacting the FCA on 0300 500 8082. The FCA address is: 12 Endeavour Square, London. E20 1JN

 

Find out more about Nick Chaitow

Nick Chaitow

Nick Chaitow

Nick is a Chartered Financial Planner for Critchleys Financial Planning LLP.

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