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 such as Raindrop to help you with the process of putting into place a pension scheme.
To get in touch with an adviser, who will be able to run through your pensions options with you, fill in the form below. You can also visit ContractorUK for more information.