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, announced in the Chancellor’s 2014 Budget and Autumn statement, there has never been a better time to invest.
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 £450,000 per year into a pension, tax-free. This is subject to a lifetime contribution allowance of £1.25m.
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 for the stop-start nature of contracting.
We have always recommend contacting a contractor / limited company specialist. The team behind Company Bug has worked with Contractor Financials since it was founded in 1999. 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.
To get in touch with an adviser, who will be able to run through your pensions options with you, or for more information visit ContractorUK.
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 Contractor Financials, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Conduct Authority.