Profits from Private Limited companies attract Corporation Tax, currently at 19% at the time of writing. Business expenditure such as staff wages, supplies, bills etc are deductible from gross profits before the Corporation Tax is calculated.
Pension contributions made by the Limited company are also seen as a business expense and therefore deducted from the gross profit before tax is calculated, thereby saving corporation tax on the amount of pension contribution.
For Example: –
|No Pension Contribution||£|
|Limited company gross profits after wages, bills etc||50,000|
|Corporation Tax payable at 19%||9,500|
|Employer Pension contribution||40,000|
|Remaining Taxable profits||10,000|
|Corporation Tax payable at 19%||1,900|
|Corporation tax reduction/saving||£7,600|
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The above is a generic example of how pension contributions can be used to extract profits from your business tax efficiently. To discuss your personal circumstances and how you could benefit please contact us on 01270 250800 or email firstname.lastname@example.org.