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Where Taxpayers and Advisers Meet

Is contribution to a pension fund from personal money eligible for tax exemption

skray
Posts:51
Joined:Mon Oct 29, 2012 5:01 pm
Is contribution to a pension fund from personal money eligible for tax exemption

Postby skray » Sun Nov 07, 2021 9:42 pm

Hi
Would you be able to advise if contribution to a pension fund from personal money eligible for tax exemption.

I am a software developer. I finished my last contract in Dec'18 and moved to a full time job since May'19.
I am putting my personal services company into Members Voluntary Liquidation. I am not sure what is the definition of by "cessation of trade" so I am aiming to complete disposal of assets by Dec'21 in order to be eligible for Entrepreneur Relief. I The amount of money that is going to be distributed to me is significant - its worth almost all my invoices over a period of 7 years and entirely in cash, as during the period I was contracting I have paid myself only a small salary and also a small amount of dividend.

I am worried that if ER is challenged by HMRC then I may to to pay tax at the highest dividend rate 32.5-37.5% rather than 10%.

I would like to ask if it is possible to open a pension fund and put at least some the money from my personal account (after receiving the distribution following assets disposal) and if the contribution to the pension fund would be exempted from tax for the current year.

(I understand it would have been more efficient if I opened a pension fund before and paid out of my business bank account but that route is no longer available. I also understand the money would be locked away and when eventually encashing my pension I may have to pay tax at higher rate).

Thanks is advance.

skray
Posts:51
Joined:Mon Oct 29, 2012 5:01 pm

Re: Is contribution to a pension fund from personal money eligible for tax exemption

Postby skray » Mon Nov 08, 2021 12:32 am

One question - if I am not eligible for ER, then do I have to pay tax as if the proceeds from liquidation were earned as dividends (32.5-38.1%), or as Capital Gains Tax i.e. 18-28%.
Can CGT be denied on similar grounds as ER?
Regards


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