SIPP questions

[chronicler]

Just some basic SIPP questions:

I've not yet started a pension and am thinking of starting a SERP.

1. How much can my ltd company put into my SERP for me? I'm currently paying myself a basic salary of £10k pa. I think I read somewhere it could put in 3 years to start it off? If so odes that mean my business can pay in £30k this tax year, and then up to £10k each following tax year?
2. How much can I personally put into my SERP on top of whatever my business pays in?

Thank you for any replies.

 

[chronicler]

Oops, I just realized I meant SIPP! Mods, could you please amend my thread title and post above, thank you.

 

[Frank the Insurance guy]

Hi @chronicler ,

You really need bespoke advice based on your personal circumstances - something you will only get from a Financial Adviser.

 

[chronicler]

Hi @chronicler ,

You really need bespoke advice based on your personal circumstances - something you will only get from a Financial Adviser.

Are you saying that the basic information listed is not true or circumstantial? I would have thought it would have been pretty simple enough to confirm or deny that.

 

[GLAbusiness]

In my experience your ltd can put up to £40k per year (rules can change quickly). This would be an allowable expense for CT.

Not sure about additional personal contributions as have no experience of that.

In my case I talked to my accountant and IFA beforehand. Make sure the IFA is independent so they can look at the whole market. My IFA talked me through the options, my attitude to risk and ethical investments before recommending a product. It is a worthwhile exercise.

Disclaimer: I am not an expert in this field, just reporting on my own experience.

 

[MikeJ]

I think it's £60k now. There's no limit to what your company can put in, up to the £60k annual limit. It's always better for the company to make the contribution, as it saves on NI (both personal and company NI). You can use previous years' allowances, but some of those years would be £40k I think.

The maximum the pension can receive without you incurring a tax charge is £60k, so unless you are cash rich and the company isn't, put everything in via the company.

Disclaimer - same as GLAbusiness...

 

[MyAccountantOnline]

Bear in mind your limited company can contribute to your pension. There'e no limit on what your company can pay provided it's wholly and exclusively for the purpose of your company business - HMRC will want to see that the total salary package including pension contributions are reasonable for the work you do.

 

[Red Wood]

Bear in mind your limited company can contribute to your pension. There'e no limit on what your company can pay provided it's wholly and exclusively for the purpose of your company business - HMRC will want to see that the total salary package including pension contributions are reasonable for the work you do.

HMRC 'could' question the value of your total income if they deem it to be too high?! That's insane if that is the case, do you have any reference material?

If a business owner decides to pay themselves 100% of HUGE profits, surely that's their decision.

 

[MyAccountantOnline]

HMRC 'could' question the value of your total income if they deem it to be too high?! That's insane if that is the case, do you have any reference material?

If a business owner decides to pay themselves 100% of HUGE profits, surely that's their decision.

I've personally never seen it done but HMRC could contest a salary package (including excessive pension contributions) isnt allowable for Corporation tax purposes as its not wholly and exclusively for the company business purposes.

BIM46030 - Specific deductions: pension schemes: wholly & exclusively: introduction - HMRC internal manual - GOV.UK

www.gov.uk

 

[MyAccountantOnline]

HMRC 'could' question the value of your total income if they deem it to be too high?! That's insane if that is the case, do you have any reference material?

If a business owner decides to pay themselves 100% of HUGE profits, surely that's their decision.

Here's another link for relevant reference material for you https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46035

 

[Bobbo]

HMRC 'could' question the value of your total income if they deem it to be too high?! That's insane if that is the case, do you have any reference material?

If a business owner decides to pay themselves 100% of HUGE profits, surely that's their decision.

For a business owners generating the profits it is less likely to be an issue.

It would be more likely to arise if say that business owner employed their spouse on £50k a year to do work that was worth nowhere near that level.

 

[Red Wood]

HMRC, the least fun people at any party.

 

[Argentum Tax]

I've personally never seen it done but HMRC could contest a salary package (including excessive pension contributions) isnt allowable for Corporation tax purposes as its not wholly and exclusively for the company business purposes.

Nicola, I have in fact seen pension contributions (of a large significant figure) being challenged by HMRC on the grounds that the total salary package was out of all proportion to the work being done by the director/shareholder and size of the company. Therefore the total package was not ‘wholly and exclusively for the purpose of the company’s trade’. They seriously threatened to take the matter to the Tax Tribunal.

 

[Red Wood]

Nicola, I have in fact seen pension contributions (of a large significant figure) being challenged by HMRC on the grounds that the total salary package was out of all proportion to the work being done by the director/shareholder and size of the company. Therefore the total package was not ‘wholly and exclusively for the purpose of the company’s trade’. They seriously threatened to take the matter to the Tax Tribunal.

That is absolutely bonkers.. USSR 2.0

 

[numbersrule]

That is absolutely bonkers.. USSR 2.0

HMRC cannot be criticised for defining Allowable Expenditure because it determines Tax Due.
In my opinion Pension Contribution limits will reduce in future but that move will be balanced by Additional Regulation on Auto Enrolment and an increase in Early Career Minimum Contributions.
Then .Gov won't feel the need to allow Late Career persons the opportunity to pay themselves too much as they probably won't need to catch up due to the increases in Early Career Minimums.