How much can a company contribute to a director's pension?

Self-Employed Pension

As a limited company director, you can pay more into your pension through your limited company than others, and still claim all the tax benefits! 

For most people, pension contributions are capped at either their salary or £40,000, whichever is the lowest out of the two. However, as a limited company director, your business can contribute up to £40,000 a year into your pension, without the salary restriction that other sole traders or self-employed people may have.

Contributions into your pension are tax-free up to £40,000 a year for the 20/21 Tax Year, however, contributions above this will be subject to a tax charge.

As a director, if you have a large amount that you would like to put into your pension scheme, then you may be able to take advantage of the carry-forward rule. This allows you to make use of any unused annual allowance from the previous three years, provided that you were a member of a registered pension scheme. You must first make use of your full annual allowance for the current tax year, before using any unused allowances from the previous three years.

You should also take into account the Lifetime Allowance and any other factors including whether you’ve taken any pension benefits from another policy. For more information about tax tips for directors’ head here. 

With a Penfold pension, paying in through your limited company takes just 5 minutes. You can set up regular payments, or make one-off payments through bank transfer, Direct Debit or instant payments, all via the app in just one tap. 

We already help thousands of directors everyday gain full control over their finances by providing the right support and tools to track down pots, make tax-efficient decisions and ultimately set up their future.  Set up your director pension with Penfold here.

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