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Using your company to pay in to your pension plan is a great way to save tax and provide for your future retirement. The payments that the company makes on your behalf are tax free on you! If you are thinking about your end of year tax planning options, do consider an “employer pension contributions”.

There are many benefits that arise from such payments, such as:

  • The payments made by the company are tax deductible. 
  • The payments made into the pension scheme are tax free for you – the director.
  • It’s a great way to put spare cash away that can grow tax free in your pension fund.

The other advantage of using your limited company to pay into your pension fund is that:

The payments are not restricted to your earned income in that tax year. If you pay your pension payments personally, then they are limited to 80% of your salary. So, if you are on a low salary, then you cannot invest more as a personal contribution.

However, there is an annual maximum allowance of £60,000 (£40,000 for years up to 2022/23) that is available to you. This means that your company can pay up to that maximum, less any personal contributions paid by you in the year.

Need to invest a large amount into your pension this year? Here is how to do it!

You can bring forward unused maximum allowances from the last 3 years, in case you want to invest a very large amount into your pension this year. Remember, you can only access these if you already had a pension plan in place in those years.

HMRC have a great tool here that can help you determine the unused allowance available.

Finally, if you don’t have funds to invest in a pension plan now, but will do in the future, it is a good idea to get one setup before 5 th April 2024, so that you have access to that maximum allowance for the next 4 years.

If you wish to discuss these planning points, give us a Call 01252 375466 and ask for me Ram Panesar FCCA.