Corporation tax is a tax imposed on the profits of companies and businesses, and it can be a significant expense for many companies. However, there are ways for directors to reduce their corporation tax liability through making pension contributions.
One of the main benefits of making pension contributions as a director is that they can be used to reduce the company's taxable profits. This is because pension contributions for employees are considered a business expense and are therefore tax-deductible. This means that for every pound a company contributes to a pension scheme, the company's taxable profits will be reduced by the same amount, resulting in a lower corporation tax bill.
From 1st April 2023, this will mean that the company will effectively get up to 25% tax relief on pension contributions, given the increase in corporation tax from this date.
Another benefit of making pension contributions as a director is that they can also help to reduce the director's own personal income tax liability, as it is a very tax efficient way of drawing money out of a company.
Overall, making pension contributions as a director can be a tax-efficient way to reduce a company's corporation tax bill and the director's personal income tax liability.
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Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
