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Tax Advantages of Pension Contributions From Your Limited Company

Pension contributions from your limited company

If you have a limited company, you can contribute to a pension and gain significant tax advantages for your business. The pension contributions you make as a company can be treated as an allowable business expense. In turn, this can then be offset against the corporation tax bill for your business.

But did you know that if you run your own business and it is incorporated as a limited company, you can make personal contributions to a pension? You can also make contributions to your pension through your company.

Both of these options will give your business significant tax advantages. However, what is right for you, depends on your individual circumstances. There are tax implications for each option. The benefit of working alongside professional and experienced accountants in Peterborough, like the team here at Direct Peak, is that we are always on the lookout for ways to help you lower your taxes and make your money work for you.

This can be done in various ways. For example, if you are a director for a limited company, your limited company can make a payment to the pension fund as an employer’s contribution. This is classed as a business expense which means it gets corporation tax relief.

The contribution goes into the director’s personal pension fund with no personal tax paid. This also means that there will be no government top-up. The contribution to the pension will also not attract any Employer or Employee national insurance either.

Utilise three years of annual allowance

It is worth noting that the annual allowance is £40k. However, if you have not made this contribution before you can utilise the past three years too. This could mean a total of £160k for the past three, plus the current year.

You will need an Independent Financial Advisor (IFA) to handle this alongside your accountant in Peterborough. We have an Independent Financial Advisor we recommend if you are looking for a reliable one to work alongside.

Want to know more about the benefits of pension contributions from your limited company? Call our friendly accountants in Peterborough. We will happily book a meeting with you to talk you through the benefits and how we can help you.

Karl Newman

Author Karl Newman

Karl is the owner and founder of Direct Peak and is our Xero Management Accountant in Peterborough. He has over seven years of experience as a Xero Specialist and Management Accountant and a strong background in accountancy, having dealt with financial forecasts, three acquisitions and business plans for multi-million pound companies.

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