SIPP (Self invested pension plan) vs workplace pension through your own ltd co

[Karimbo]

Hello

just wonder if there is much difference in tax treatment for both of these.

Im drawn to SIPPs because I heard those workplace pension plans aren't great - they have huge fees and the fees are detrminetal to the compounding affect of investing in stocks.

Many people suggested going through the SIPP route. I was wonder what is the most tax efficient way. If I go the workplace pension route the additional matched amount from employer will be a tax deductable expense and reduce corp tax.

If I decide to go through SIPP route and just pay myself the same amount, I will incur more income tax, but is that income tax essentially refunded after I put it into pensions?

How does SIPP tax rebate work. Would I pay the tax on PAYE where it's collected and get it refunded when I file self assessment. Or does the tax refund get added to the pension pot?

 

[Karimbo]

My premise was wrong, just read a bit more. SIPP is the preferable option for me - but the "employer" can also pay into your SIPP. I assume SIPP was for individuals to pay itno their own pensions.

The questiosn remains though, is it more tax effiecient to pay the pension through the company or do it out of taxed income given that there is a 20% basic rate rebate. I am a basic rate taxpayer.

How does NI interplay with this? Does NI get subtracted if the company invests in pension. Or would NI be charged on the amount before pension is deducted?

 

[WaveJumper]

SIPP all day for me if you need a pension wrapper the thought of anyone else managing my money would fill me with dread. Can't answer your tax / NI question though have to leave that one for the accountants on here

 

[xjr13m]

My premise was wrong, just read a bit more. SIPP is the preferable option for me - but the "employer" can also pay into your SIPP. I assume SIPP was for individuals to pay itno their own pensions.

The questiosn remains though, is it more tax effiecient to pay the pension through the company or do it out of taxed income given that there is a 20% basic rate rebate. I am a basic rate taxpayer.

How does NI interplay with this? Does NI get subtracted if the company invests in pension. Or would NI be charged on the amount before pension is deducted?

Your limited comany can pay into your SIPP and this is an expense that can be set against profit to reduce corporation tax. You do not receive pension tax relief on company contributions (because the company takes the corporation tax relief). As you are a basic rate taxpayer you are not disadvantaged. Your company can contribute up to £60K per year irrespective of your income (as long as it satisfies HMRC's 'wholly & exclusively' test). Company contributions are not subject to NI.