The maximum you can personally invest into a pension and receive Tax Relief on, is 100% of your salary subject to an Annual Allowance limit which is currently £40,000. Please note dividends are not classed as salary. If, as an example, you have a salary of £8,000 and dividends of £45,000 the maximum you can personally Invest is £8,000. However, contributions that are made by your company into a pension for you are NOT restricted by your salary; your company can Invest the full Annual Allowance maximum of £40,000 and potentially more than this using Carry Forward (more on this later). Please note, you will need to satisfy what is called a ‘Wholly & Exclusively’ requirement, but as a Shareholding Director this should not be a problem.
From a tax perspective, personal contributions into a pension (ignoring the contribution limits) would be made from your after tax income. The contribution would then qualify for Basic Rate Tax Relief at source and Higher Rate Tax Relief, if applicable, could be claimed via your Self-Assessment Tax Form. The deadline for a personal investment tax-wise is the end of the tax year.
Company contributions into a pension will be a tax deductible business expense and so reduce the amount of Corporation Tax your company pays. Such a contribution is also NOT subject to National Insurance. The deadline for a company investment tax-wise is your Company’s Year End which is likely to be different to the tax year. As mentioned earlier, your company can possibly invest more than £40,000 as you can Carry Forward any unused Annual Allowances from the three previous tax years. To be eligible for Carry Forward you must have been a member of a Pension Scheme during the Carry Forward years, although you do not actually need to have been making contributions. Before making any investment I would suggest that you get specific advice.
Please contact Lexington on firstname.lastname@example.org or 01793 771093 to discuss your Financial Planning and Wealth Management plans.