As a director of a limited company in the UK, you can make pension contributions through your company. This can be a tax-efficient way of saving for your retirement, as pension contributions are deductible from your company’s profits for Corporation tax purposes.
You can set up a company pension scheme, such as a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS). The company pension scheme is owned by your company, and the contributions are invested on behalf of the scheme members.
The amount of pension contributions that you can make through your company depends on various factors, such as your age, earnings, and the annual allowance. The annual allowance is the amount of pension contributions that you can make each year without incurring a tax charge. The current annual allowance for most people in the UK is to £60,000 from April 2023 and £40,000 for April 2022, although there are some exceptions to this rule.
Pension is the amount of money you save for your retirement. This is done by making contributions into a workplace pension or personal pension. Workplace pension is setup by the employer while personal pension is setup by yourself through a pension provider. Pension contribution by a self-employed into his/her pension fund is not tax deductible while the pension contribution paid by a company on behalf of its director is allowable expenses for tax purpose and hence more tax efficient.
It is important to seek professional advice from a financial advisor or pension specialist before making any decisions about pension contributions through your limited company. They can help you choose the most appropriate pension scheme and investment strategy for your needs, and ensure that you comply with all the relevant regulations and tax rules.