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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I am a healthcare Professional and pay taxes as a self-employed.

Resolved Question:

Hello, I am a healthcare Professional and pay taxes as a self-employed. ( and I have a 20% tax relief for my pension: I put £27000 a year and get a relief of £5700 circa) I have been advised to incorporate for tax purpose. But I am confused about pension tax relief.
I have an accountant saying that tax relief is related to you salary (which would be circa £8000) so a relief of £2000 only.
Another accountant is saying that if is the company paying my pension I should be equally able to relief the full amount of it (£5700).
Can you help?
Fabrizio
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

You cannot get pension tax relief in any one tax year on a sum in excess of 100% of your salary. So, if your salary is £8,000 per annum, the most you can contribute in the tax year that you earn £8,000 and get tax relief on is £8,000 at your top rate of tax. Take a look here for confirmation of that.

There is an overriding limit to personal pension contributions which is £40,000 for 2014/15 but if your salary is only £8,000, you would still only get tax relief on £8,000 at your top rate of tax.

A company with profits up to £300,000 per annum pays corporation tax at 20%. If your employer company contributes £27,000 into your pension, it will get tax relief at 20%. The annual allowance limit of £40,000 still applies. However, as you will read here and here, HMRC may question what it perceives to be excessive contributions by an employer company in certain circumstances.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

So, in you opinion if I decide to incorporate (my company would have a profit below £300,000) I would not loose pension tax relief.

Thank you

F

Expert:  TonyTax replied 2 years ago.
In you set up a company and the company paid the pension contribution, the tax relief available to the company would not be limited to your salary level as it would if you paid the contributions personally. It would certainly be sensible to have a salary if your company is going to pay pension contributions.
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