Stakeholder Pension contributions made by my own limited company

[mike@harding-roberts]

I have recently retired from a large company and formed a one-man limited company. If I take no salary in tax year 03/04 can my company make a £3,600 contribution to my personal Stakeholder Pension? (I would not make any other contributions to my Stakeholder Pension.)

If the company can contribute the £3,600, does this avoid NICs, Income Tax and Corporation Tax on the £3,600?

Alternatively, I could make a £3,600 (gross) contribution personally and get 40% relief as I am a higher rate taxpayer by virtue of my pension from my previous employer.

I am trying to work out if I'm better off making the contribution personally or out of my company.

Mike

[demetris]

As anybody can make contributions to a stakeholder plan on behalf of a person who has no earnings up to £3600, yes, your comapny can do this for you. If the plan is an employer scheme, there will be no income tax deducted and they will be a tax allowable company expense for corporation tax. In addition, there will be no NIC.

As to what the best route is, in my opinion the savings are higer if you pay contributions to presonal plan because:

1.company pays: corporation tax saving for pension costs appx £684 plus relief at source £792.

2. personal plan: corporation tax savings as remuneration £684 plus relief at source 22% £792 plus higher rate tax relief on your personal tax return £648.

In addition to the above options, I would suggest why don't you look at ISAs as they hava certain advantages over pensions.

I have a complete article in plain language on the above that I can send to you to your email if you want.

Hope this helps.

Demetris Savva BA FCCA
http://www.tax-accounting-london.info

[mike@harding-roberts]

Demetris,

Yes, I would appreciate it if you would send me the article. My email is mike@harding-roberts.freeserve.co.uk

Many thanks

Mike Harding Roberts
http://www.hraconsulting-ltd.co.uk