Enhance Your Pension with Your Limited Company: A Feasible Option?

May 14, 2024

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Are you aware of the potential to add significant value to your pension through your Limited Company? In the UK, pensions are considered allowable expenses by HMRC, offering remarkable tax benefits that can be offset against your Corporation Tax bill. In this article, we’ll explore the feasibility of leveraging your Limited Company to enhance your pension contributions and the advantages it brings. Discover how Price & Accountants, located near Liverpool Street Station in London, can assist you in maximizing your pension potential and optimizing your tax planning.

Understanding the Two Options:

When it comes to contributing to your pension, you have two choices: making individual contributions or making direct contributions through your Limited Company. Both options come with their own set of tax benefits, and the most suitable choice depends on your specific circumstances.

Contributing to a Personal Pension:

Making individual contributions to your personal pension offers several tax implications. Every payment you make into your pension is tax-deductible, and the amount you contribute determines the rate of income tax you pay. For instance, if you are a basic rate taxpayer and contribute £100 into your pension, you will save a total of £125 after tax relief is applied. Currently, you can contribute 100% of your taxable income, up to a maximum of £40,000. If your income is below £3,600 per year or you have no income, you can contribute up to £3,600 annually.

Making Contributions as a Limited Company Director:

As a director of your Limited Company, you can consider making contributions to your pension in a different manner. While receiving a moderate salary and dividends can help reduce your tax liabilities and maximize your take-home pay, dividends are not considered “relevant UK earnings” for pension purposes.

Instead, the most effective approach is to make pre-tax contributions to your pension through your Limited Company. These contributions are treated as allowable expenses, enabling your company to receive tax relief against Corporation Tax. By utilizing this method, you could potentially save up to 19% in Corporation Tax in the current tax year.

How Price & Accountants Can Assist:

At Price & Accountants, we specialize in providing tailored advice and support in all tax-related matters, including tax planning. Our team of skilled accountants near Liverpool Street Station in London is dedicated to helping clients maximize their pension contributions and optimize their tax strategies. By partnering with us, you can unlock the full potential of your Limited Company to enhance your pension and secure a brighter financial future.

Contact our team today to discover the various ways we can assist you. As our valued client, you can benefit from our expertise in tax-related issues and efficient tax planning. Let Price & Accountants be your trusted partner in achieving your pension goals. Get in touch with us now to learn more about how we can help you add value to your pension and secure a financially sound future.