If you’re looking for ways to minimise your corporation tax bill, it’s worth considering if there are deductible expenses you can claim. One key area to think about is your director pension contributions, as these can be offset against your taxable profits.
Pension contributions for directors of up to £40K per annum can be deducted from your taxable profits. With a tax saving of 19% of your pension contribution, this could potentially save you £7,600 per company director – a nice helping hand if you’re aiming to cut your tax costs.
How do I offset my pension contributions?
Being able to treat your limited company pension contributions as an allowable business expense means you can offset this expense against your company's corporation tax bill.
Like any expense, to be an allowable deduction for tax purposes, your pension contributions have to be made 'wholly and exclusively' for the purposes of the business. Basically, this means that the contribution should be at a reasonable level for the individual concerned.
In practice, HMRC guidance shows that:
Talk to us about offsetting your pension contributions
If you’re making director pension contributions through your limited company, it’s a no-brainer to claim this as a deductible expense against your corporation tax bill.
Talk to us and we’ll put you in touch with a suitable Independent Financial Adviser (IFA) who can advise you on the most beneficial way to set up your pension. We’ll also factor these deductible expenses into your annual corporation tax return.