Putting self employed earning directly towards a pension

[claret_n_Blue]

Hi all,

I work full time and my employer sorts all my stuff out regarding NI contributions, income tax, pensions etc.

In my spare time, I have set up an online shop which gives me a nice little earning on the side. My online business is under a private ltd company account, where I am taking a small salary. My thought was to put this entire "salary" as a pension. Is it possible for me to declare this directly as a pension?

How would I go about doing this and what would I need to take into consideration to make sure I am complying with all laws etc?

Thanks everyone!

 

[Adam93]

Have you been declaring a salary via payroll software and submitting the appropriate RTI’s and paying the correct PAYE to HMRC?

The limited company can make pension contributions but you have to make sure your pension provider knows that these are EMPLOYER contributions, not personal contributions.

If you don’t understand the above, just get an accountant, it will save you in the long run and they’ll ensure everything is done correctly.

 

[claret_n_Blue]

Have you been declaring a salary via payroll software and submitting the appropriate RTI’s and paying the correct PAYE to HMRC?

The limited company can make pension contributions but you have to make sure your pension provider knows that these are EMPLOYER contributions, not personal contributions.

If you don’t understand the above, just get an accountant, it will save you in the long run and they’ll ensure everything is done correctly.

Yeah. I have been doing all the RTI and PAYE etc stuff. I don't earn enough to be VAT registered but I filed all my company tax and everything last year so it is all perfectly fine in that sense.

It's only about £8k a year (profit) I make from my online shop, and I was taking the whole amount as a salary and then I realized that this increased my income tax amount so I was wandering if I could offset that by putting this money away as a pension as I don't need it, and then what I would need to do regarding that.

 

[SteveHa]

In addition to what Adam says, and bear in mind we have no figures to work with, but you also have to be mindful of the annual allowance (possibly adjusted downwards depending on your income) which, if breached, will give rise to an additional tax charge.

If you are a high earner and if this makes no sense, speak to a professional before you do anything/

 

[DontAsk]

It's only about £8k a year (profit) I make from my online shop, and I was taking the whole amount as a salary and then I realized that this increased my income tax amount so I was wandering if I could offset that by putting this money away as a pension as I don't need it, and then what I would need to do regarding that.

If you take it all as salary and pay it into a pension then the pension scheme will handle the basic rate tax relief. If you are a higher rate tax the additional relief will be calculated in your self assessment tax return.

I would be taking cash out as dividends up to the tax free allowance (£5000 for FY 17-18, £2000 thereafter), rather than salary. Pay that into a pension and you still get tax relief so £800 salary after tax becomes £1000 in your pension or take £1000 in dividends which becomes £1250 in your pension. Win-win.

Others have mentioned the annual allowance and the need to get real advice.

This "advice" is worth what you paid for it