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Pension Plans

As a contractor you can either make pension contributions from your own personal funds or directly from your company’s income. Please see a brief description of both options below, with an additional note regarding tax relief.

Personal Pension Contributions
If you choose to contribute some of your personal savings or income into a pension scheme, then you are entitled to tax relief on such contributions. Pension providers will reclaim the basic rate of tax on any personal contributions made which will then be added directly to your pension fund.

Company Pension Contributions
Pension contributions made by a company to their employees’ pension funds are deductible for corporation tax purposes, provided the company can demonstrate that the contributions are wholly and exclusively for business purposes. Whist the guidance on what this means in practice is not definitive; in general, if a remuneration package is reasonable and does not result in an overall tax loss for the company, then the contributions can be deducted before calculating any taxable profits.

However, unlike personal pension contributions, the amount that can be invested directly from your company’s income is not related to or restricted by your personal income.

Tax Relief
Please note that the there is a limit on the total amount that can be paid into your total pension scheme each year for tax relief purposes. This pension annual allowance applies across all of the schemes you belong to, it’s not a ‘per scheme’ limit and includes all of the contributions that you or your employer pay or anyone else who pays on your behalf.

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