Pension contribution without tax relief?
Discussion
I've seen phrases from various sources which amount to "you cannot pay more into yr personal pension than you earn AND still receive tax relief"
The situ i face is: have an Ltd which my wife and I run, realistically have been winding down work with a view to retiring, so there's nothing in the Company. We both have SIPPs which am hoping we won't touch for another few years, but due to Company winding down, haven't been able to top them up for a cple of years.
What we do have are funds elsewhere GIA etc.....so am trying to figure out if there's a way to get more money into the SIPPs. I don't care about tax relief, its being able to trade shares without CGT and then getting tax relief on withdrawals which would be the aim.
so....is the wording i'm seeing just poorly written? is it IMPOSSIBLE (legallY) to pay money into a pension with sensible earninsg, or go over whatever earnings we have?
Is there a legit way to park monies in the company ( us loaning the company funds) and deploy straight away to the SIPPs?
The situ i face is: have an Ltd which my wife and I run, realistically have been winding down work with a view to retiring, so there's nothing in the Company. We both have SIPPs which am hoping we won't touch for another few years, but due to Company winding down, haven't been able to top them up for a cple of years.
What we do have are funds elsewhere GIA etc.....so am trying to figure out if there's a way to get more money into the SIPPs. I don't care about tax relief, its being able to trade shares without CGT and then getting tax relief on withdrawals which would be the aim.
so....is the wording i'm seeing just poorly written? is it IMPOSSIBLE (legallY) to pay money into a pension with sensible earninsg, or go over whatever earnings we have?
Is there a legit way to park monies in the company ( us loaning the company funds) and deploy straight away to the SIPPs?
ISAs would be first port of call, assuming the money is in your name and not the company's.
It is possible, within the rules, to make a contribution and not be eligible for tax relief. If you are looking at big money (e.g. over £200k) then you might find the difficulty is actually finding a SIPP provider who will facilitate it.
It is possible, within the rules, to make a contribution and not be eligible for tax relief. If you are looking at big money (e.g. over £200k) then you might find the difficulty is actually finding a SIPP provider who will facilitate it.
sorry - i didn't mention ISA's, as was trying to drill down into the SIPP question/angle...yep, ISA's are full till next yr, then will add whatever the max is at that time.....
so it is possible to contribute more to a sipp without getting tax relief....
you mention finding a provider who would allow it could be tricky - out of interest why would that be, if its permissable one would have thought that they should all allow it?
as to how much £ - not sure; i like the ability to use options in the GIA, but cutting out a % of that ability to have straightforward tax position might be handy. i guess being able to top up Mrs SIPP to equal mine would be a good starting point - IF as you say i could find a provider that would allow it.
so it is possible to contribute more to a sipp without getting tax relief....
you mention finding a provider who would allow it could be tricky - out of interest why would that be, if its permissable one would have thought that they should all allow it?
as to how much £ - not sure; i like the ability to use options in the GIA, but cutting out a % of that ability to have straightforward tax position might be handy. i guess being able to top up Mrs SIPP to equal mine would be a good starting point - IF as you say i could find a provider that would allow it.
greengreenwood7 said:
....
What we do have are funds elsewhere GIA etc.....so am trying to figure out if there's a way to get more money into the SIPPs. I don't care about tax relief, its being able to trade shares without CGT and then getting tax relief on withdrawals which would be the aim.
so....is the wording i'm seeing just poorly written? is it IMPOSSIBLE (legallY) to pay money into a pension with sensible earninsg, or go over whatever earnings we have?
Is there a legit way to park monies in the company ( us loaning the company funds) and deploy straight away to the SIPPs?
You pay income tax on 75% of all withdrawals so contributions without tax relief just seem a very bad idea?What we do have are funds elsewhere GIA etc.....so am trying to figure out if there's a way to get more money into the SIPPs. I don't care about tax relief, its being able to trade shares without CGT and then getting tax relief on withdrawals which would be the aim.
so....is the wording i'm seeing just poorly written? is it IMPOSSIBLE (legallY) to pay money into a pension with sensible earninsg, or go over whatever earnings we have?
Is there a legit way to park monies in the company ( us loaning the company funds) and deploy straight away to the SIPPs?
If it's tax paid money in your personal account then consider putting it into ISAs over the next few years?
You could look at EIS and VCTs.
Or you could just live off your savings for a while, not paying any tax or fees while your pension grows?
If your company borrowed money from you and spent it all on your salary, wouldn't the company be insolvent?
sorry folks, am crap at formatting on this forum - so can't do 'quotes' to reply to:
why would i want to? (shoot me down if its illogical)
1/ balance wife/my pension pots, that way tax on the way out would also be balanced, would/could mean that we could both take up to 50k from each sipp before going to higher rate. (might offer more flexibility as to what to draw from what depending performamnce of each - if 1 has lagged in a yr)
2/ isa's are maxed, and yes, we'll continue to max them each year;
3/obvs no one knows what the budget will hold, but trading inside the GIA we have is likely to get more punitive - cgt etc, so pulling some funds from that to pop into a pension makes in my head - sense;
because when we start to need to draw from investments:we want to take a blend of monies from sipps/isas/gia etc to minimize the tax exposure.
any of that make sense or am i missing something?
why would i want to? (shoot me down if its illogical)
1/ balance wife/my pension pots, that way tax on the way out would also be balanced, would/could mean that we could both take up to 50k from each sipp before going to higher rate. (might offer more flexibility as to what to draw from what depending performamnce of each - if 1 has lagged in a yr)
2/ isa's are maxed, and yes, we'll continue to max them each year;
3/obvs no one knows what the budget will hold, but trading inside the GIA we have is likely to get more punitive - cgt etc, so pulling some funds from that to pop into a pension makes in my head - sense;
because when we start to need to draw from investments:we want to take a blend of monies from sipps/isas/gia etc to minimize the tax exposure.
any of that make sense or am i missing something?
OutInTheShed said:
You pay income tax on 75% of all withdrawals so contributions without tax relief just seem a very bad idea?
Not always. I retired at 58, and don't get state pension until 67. I'll have withdrawn 9 x £12570 (£113,130) from my 75% taxable portion without paying any tax. Maybe more if the personal allowance ever increases. "Or you could just live off your savings for a while, not paying any tax or fees while your pension grows?
If your company borrowed money from you and spent it all on your salary, wouldn't the company be insolvent? "
can't live off savings (investments) without paying cgt, as those monies are in GIA......
to the 2nd part of yr point, yes, it would be, but wasn't sure whether i could personally make a contribution to sipp direct ( in excess of my nominal/non-salary) or whether i'd be able to find a way to legit do that via the Ltd....seems that doing so personally according to the info in the 2md/3rd reply is possible.
Thx to that reply, i found a cple of references online where folks had done that with HL who are our providers, so hopefully that may well work ( if its the sensible route to go)
If your company borrowed money from you and spent it all on your salary, wouldn't the company be insolvent? "
can't live off savings (investments) without paying cgt, as those monies are in GIA......
to the 2nd part of yr point, yes, it would be, but wasn't sure whether i could personally make a contribution to sipp direct ( in excess of my nominal/non-salary) or whether i'd be able to find a way to legit do that via the Ltd....seems that doing so personally according to the info in the 2md/3rd reply is possible.
Thx to that reply, i found a cple of references online where folks had done that with HL who are our providers, so hopefully that may well work ( if its the sensible route to go)
TwigtheWonderkid said:
OutInTheShed said:
You pay income tax on 75% of all withdrawals so contributions without tax relief just seem a very bad idea?
Not always. I retired at 58, and don't get state pension until 67. I'll have withdrawn 9 x £12570 (£113,130) from my 75% taxable portion without paying any tax. Maybe more if the personal allowance ever increases. greengreenwood7 said:
sorry folks, am crap at formatting on this forum - so can't do 'quotes' to reply to:
why would i want to? (shoot me down if its illogical)
1/ balance wife/my pension pots, that way tax on the way out would also be balanced, would/could mean that we could both take up to 50k from each sipp before going to higher rate. (might offer more flexibility as to what to draw from what depending performamnce of each - if 1 has lagged in a yr)
But you are going to pay tax twice on 75% of the contribution. That isn't sensible.why would i want to? (shoot me down if its illogical)
1/ balance wife/my pension pots, that way tax on the way out would also be balanced, would/could mean that we could both take up to 50k from each sipp before going to higher rate. (might offer more flexibility as to what to draw from what depending performamnce of each - if 1 has lagged in a yr)
greengreenwood7 said:
"Or you could just live off your savings for a while, not paying any tax or fees while your pension grows?
If your company borrowed money from you and spent it all on your salary, wouldn't the company be insolvent? "
can't live off savings (investments) without paying cgt, as those monies are in GIA......
to the 2nd part of yr point, yes, it would be, but wasn't sure whether i could personally make a contribution to sipp direct ( in excess of my nominal/non-salary) or whether i'd be able to find a way to legit do that via the Ltd....seems that doing so personally according to the info in the 2md/3rd reply is possible.
Thx to that reply, i found a cple of references online where folks had done that with HL who are our providers, so hopefully that may well work ( if its the sensible route to go)
face the facts, you are going to pay some tax.If your company borrowed money from you and spent it all on your salary, wouldn't the company be insolvent? "
can't live off savings (investments) without paying cgt, as those monies are in GIA......
to the 2nd part of yr point, yes, it would be, but wasn't sure whether i could personally make a contribution to sipp direct ( in excess of my nominal/non-salary) or whether i'd be able to find a way to legit do that via the Ltd....seems that doing so personally according to the info in the 2md/3rd reply is possible.
Thx to that reply, i found a cple of references online where folks had done that with HL who are our providers, so hopefully that may well work ( if its the sensible route to go)
How much money do you need?
If you have lots of savings in a general fund and share account, you could sell enough shares each year to use up your CGT allowance.
There's a limit to how much fees and complication it's worth racking up to save a little bit of tax.
Many of the rules and limits have changed since I last needed to know the detail, so I'd suggest doing some up to date research.
I think entrepreneur's relief has changed?
Also consider the big picture of things like your house.
If you're likely to move that could either use up a lot of tax-paid savings or create a pile of tax-paid cash. By 'tax-paid' I mean not tied up in SIPP, ISA etc.
In the current climate, I wouldn't rely on the tax free lump sum surviving unscathed.
"face the facts, you are going to pay some tax.
How much money do you need?"
yep, i know we'll be having to pay tax, but paying as little as possible makes sense - no?
How much money? as much as is sensible to take out of the 'pots'....maybe i'm weird in this, but if i've had 'x' to spend whilst working, if the monies are available, i expect to spend 'x' + 'y'; working for myself we haven't had 'proper' holidays and have missed a few other luxuries when times were bad.
"If you have lots of savings in a general fund and share account, you could sell enough shares each year to use up your CGT allowance."
Unless i'm being a goon, that's currently £3k each - bloody council tax & water rates come close to that; so any selling of shes from the GIA will create CGT on top of the CGT from trading shares during any year.
"There's a limit to how much fees and complication it's worth racking up to save a little bit of tax."
a bit of tax? in fairness i haven't run the numbers, but would seem logical that if both wife and i were to max out the lower tax band rather than me being above it - that would be a fair portion, plus again, the lack of CGT on actually maintaining/growing those investments.
"Also consider the big picture of things like your house."
just bought a house and no plans barring illness/change of circs to move for 10+ and we don't hold much in savings acc's - as that woudl be taxed, plus debases rather rapidly.
"In the current climate, I wouldn't rely on the tax free lump sum surviving unscathed."
i'm not thinking of lump sums, i'm thinking about being able to drawdown every year and take advantage of the first 25% being tax free, and the rest being taxed at say 20% ( in todays values).
How much money do you need?"
yep, i know we'll be having to pay tax, but paying as little as possible makes sense - no?
How much money? as much as is sensible to take out of the 'pots'....maybe i'm weird in this, but if i've had 'x' to spend whilst working, if the monies are available, i expect to spend 'x' + 'y'; working for myself we haven't had 'proper' holidays and have missed a few other luxuries when times were bad.
"If you have lots of savings in a general fund and share account, you could sell enough shares each year to use up your CGT allowance."
Unless i'm being a goon, that's currently £3k each - bloody council tax & water rates come close to that; so any selling of shes from the GIA will create CGT on top of the CGT from trading shares during any year.
"There's a limit to how much fees and complication it's worth racking up to save a little bit of tax."
a bit of tax? in fairness i haven't run the numbers, but would seem logical that if both wife and i were to max out the lower tax band rather than me being above it - that would be a fair portion, plus again, the lack of CGT on actually maintaining/growing those investments.
"Also consider the big picture of things like your house."
just bought a house and no plans barring illness/change of circs to move for 10+ and we don't hold much in savings acc's - as that woudl be taxed, plus debases rather rapidly.
"In the current climate, I wouldn't rely on the tax free lump sum surviving unscathed."
i'm not thinking of lump sums, i'm thinking about being able to drawdown every year and take advantage of the first 25% being tax free, and the rest being taxed at say 20% ( in todays values).
greengreenwood7 said:
"In the current climate, I wouldn't rely on the tax free lump sum surviving unscathed."
i'm not thinking of lump sums, i'm thinking about being able to drawdown every year and take advantage of the first 25% being tax free, and the rest being taxed at say 20% ( in todays values).
What do you have against the "quote" button?i'm not thinking of lump sums, i'm thinking about being able to drawdown every year and take advantage of the first 25% being tax free, and the rest being taxed at say 20% ( in todays values).
If the lump sum gets reduced, odds are the tax free 25% will be as well surely?
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