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How do I plan with pensions?

For employees, particularly those paying basic rate tax, pension contributions made by your employer are tax-efficient as there is no tax to pay on this benefit and the employer can claim a business tax deduction. If you own the company, this can be a tax-efficient way to extract value.

It is often worth setting up arrangements where employees exchange some of their salary in return for a larger pension contribution made by the employer. This saves on NIC that would have been paid by both employer and employee and the savings can be passed on as higher pension contributions. 

For individuals with a net income of £110,000 or more, pension contributions made on their behalf by employers will be added back to establish whether or not tax relief on contributions should be restricted because their gross income exceeds £150,000. Care should be taken to avoid incurring an annual allowance charge.


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