Company paying directors pension - limit?

by **sarahg** on Tue Feb 09, 2010 9:52 am

If director takes basic salary plus dividends is there a limit on how much the company can pay in to the Directors Pension during the year?

Can anyone point me in the direction of legislation?

Thanks

by **AvocadoK** on Fri Feb 19, 2010 8:09 pm

There are four limits or tests to watch out for:
1. The Annual Allowance, currently £245k (s227 FA 2004)
2. The Lifetime Allowance, currently £1.75m (s214 FA 2004)
3. The Special Annual Allowance charge, which hits special contributions of over £20k if income exceeds £130k (Sch 35 FA 2009 as amended in the PBR)
All of these will result in a tax charge for the individual if the limits are exceeded.

And finally, 4., the usual 'wholly & exclusively' test, which is less clear cut. Basically, you should be able to get CT relief if the director's total package (salary + benefit + pension but ignoring dividends) is no more than market rate for the job. See HMRC guidance in their Business Income Manual BIM 46035.

AK

by **isfs** on Tue Jul 27, 2010 5:28 pm

I agree.
p.s. have you seen you joined with 6 minutes of each other!

by **Incredulum** on Tue Jul 27, 2010 6:11 pm

Also beware the pensions spreading rules if you're making a particularly large contribution.

Limits (tho' not the full relevant guidance) in this document http://www.hmrc.gov.uk/pbr2007/pbrn13.pdf