Pensions remain one of the last remaining significant tax breaks available to contractors, freelancers and business owners. And with the sweeping changes to the flexibility surrounding how you access your pension, there has never been a better time to invest. There are a variety of pensions for directors of limited company and contractors available.
How to invest in a pension
There are two ways to contribute to a pension scheme if you are a limited company owner – via the company itself (an employer contribution), or via a personally funded plan. Income tax relief at your highest marginal rate is due on personal contributions whereas if you contribute via your company, these transfers will be classed as a legitimate expense and so can be offset against Corporation Tax, representing a significant saving – and no National Insurance Contributions or benefit in kind deductions are payable by the ‘employee’ on pension contributions.
What are the pension contribution limits?
You can currently invest up to £40,000 per year into a pension, tax-free. This can be through a salary and dividends.
Choosing a contractor pension provider
It is important that you take time researching the market for the right pension. You should choose a firm that has a strong and trusted track record, and one that can cater to the stop-start nature of contracting.
We have always recommended contacting a contractor/limited company specialist. The team behind Company Bug has worked with CMME since they launched. As the largest IFA dedicated to the needs of freelancers, contractors and company owners, they have helped thousands of individuals over the past 15 years.
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The value of investments may rise as well as fall and past performance is not a guide to future returns. Financial advice is given by CMME, which is a trading name of CMME Ltd and is regulated and authorised by the Financial Conduct Authority.