What to do when you reach your pension contribution limit?

WhyTheFace

Hi,

Are there any legitimate ways of avoiding having to pay the full rate of tax on a PAYE salary once you have reached the pension age related percentage limit?

If this makes any difference, I have taken 10% equity in the company (holding company set up) I work for meaning I receive a base salary + 10% of distributable net profits.

I pay 5% into my pension each month which is matched by my employer. I can only put a further 15% of total salary in so just want to know if there is any other mechanism I can avail of to avoid paying tax on a portion of my remaining earnings (after spending and putting some aside as savings).

Am I right in saying I can transfer to the holding company and leave earnings there tax free until I use it for something else or pay tax if I decide to take it out as cash?

Thank you

DFB-D

I'm not sure how you propose to do this?

So you work for company B and the holding company is A.

Are you transferring your employment or the salary you wish to save to Company A?

In any case, taking a lower salary has no tax consequences, however if this is in lieu of anything else (eg a payable in your favor), it is potentially a deemed distribution.

You could give up the salary and aim for retirement relief/ entrapreneur relief but you would potentially be losing 90 per cent to the other shareholders.

You need a tax advisor for a proper analysis, there are many factors including Close Co rules, but it is not easy to avoid IT in a beneficial way when you only own 10pc equity.