Preparing for retirement
Your limited company can contribute pre-taxed company income to your pension. Because an employer contribution counts as an allowable business expense, your company receives tax relief against corporation tax, so the company could save up to 25% in corporation tax. Your contributions must abide by the rules for allowable deductions. The rules state that the pension contributions should be ‘wholly and exclusively’ for the purposes of business.
To figure out whether this is the case, HMRC looks for certain evidence, for example whether other employees are receiving comparable remuneration packages. Another benefit is that employers don’t have to pay National Insurance on pension contributions. This means that your company can save by paying money directly into your pension rather than paying money in the form of a salary.
Please remember that the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. If you are unsure of the suitability of your investment please seek advice. Tax rules can change and the value of any benefits depends on individual circumstances.
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