Planning for retirement is important, but it can be forgotten when you’re working hard to build up your business. 
Workplace pension schemes help people who are employed full time to build up their pension pot. However, if you’re running a small business, it might not be a priority for you at the moment, but there are some options you might like to think about. 
The pension challenge 
On Pensions Awareness Day this year the Association of Independent Professionals and the Self-Employed (IPSE), said that 55% of self-employed people don’t have a pension. 
With self-employment and small businesses growing so fast, it’s predicted that up to 3.3 million could be left without pension provision by 2028. 
Regular payments into a private pension scheme could be challenging if your income isn’t regular or if you are drawing dividends rather than a salary from your limited company. 
However, if you have a limited company, paying into your pension can provide tax advantages. 
Your pension options 
There are two main ways to contribute to your pension when you run a limited company. Firstly, can make personal contributions from the salary that your business pays to you. Alternatively, you can contribute company income that has already been taxed. 
The best choice for you will depend on your circumstances. 
Option One: Personal pension contributions 
Pension contributions from your personal income are eligible for tax relief at the rate of income tax you pay. 
Although you can put as much money as you like into your pension each year, you will only receive tax relief up to 100% of your annual income or a maximum of £40,000. 
However, if you’re the director of a limited company receiving some of your income as dividends instead of salary, these won’t count towards your eligible income. 
For example, if you pay yourself a salary of £20,000 and receive an annual dividend of £20,000, you’ll only receive tax relief on a maximum of £20,000 of pension contributions in the year. You can pay in as much of the dividend you receive as you like, but you won’t receive any tax relief. 
If you choose to reduce your dividends and increase your salary you will be liable for more National Insurance (NI) contributions and personal tax. 
Option two: employer pension contributions 
Employer pension contributions are an allowable business expense. Contributions across the year can be offset against your company’s corporation tax liability and your NI contributions won’t be affected. 
To meet HMRC’s rules for allowable deductions, your pension contributions must be exclusively for business purposes, so you could be asked if other employees receive pension contributions too. However, if you’re the sole director, this won’t apply. 
Your pension plans 
If you aren’t currently paying into a pension scheme, it’s worth thinking about it as soon as you can. For example, if you are 40 years old, will need to save less per month than when you are 50. 
You can use the Money Advice Service pension calculator to work out what you will need for a comfortable retirement (but remember to include inflation). 
If you would like to set up regular pension payments from your business, your bookkeeper can explain how it works in more detail. 
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