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  1. #1

    SIPP's and surplus company cash

    I'm a contract worker with my own company.
    My accountant set up my monthly wage at 3576.00.
    However after paying all company out goings there is still a growing surplus in the company account.

    Is it possible to set up a SIPP, then.
    Take an extra dividend of say 2000.00 per month and after tax pay the nett sum into my
    SIPP, then.
    Have my company, as my employer, also contribute to my SIPP ?

  2. #2
    The answer to both question is yes in principle, but it's best to speak to your accountant as there may be ways to reduce your tax bill.
    You can take extra dividends but this would be after paying corporation tax and although you would be able to offset SIPP payments against your higher rate tax liability (so no higher tax) this may not be the most efficient way as there is a 5000 investment income allowance (soon to go to 2000 if the tories win)
    If you are married and your wife earns below the Higher rate tax allowance, it may be sensible to make your wife a Director/Share Holder so that some dividend payments go to her.
    When I was contracting via a Limited Company I found that making Employer payments directly into my SIPP was the most efficient. The reason being that the payments are made before Corporation Tax and although you don't get the HMRC 20% contribution it still works out as neutral (but without the Dividend Investment Income tax liability)

  3. #3
    No. That is not the right way to do it. That will increase your tax.

    Employer contributions are the norm for company directors.

  4. #4
    Thanks Ferminon.
    Dunstonh are you talking about a tax increase on the 2000.00 dividend or will it affect my whole salary. If it's just on the 2000.00 I'm willing to take the hit just to get some of the money out of my company account, which is quite hard to do
    I'm I right in saying you have to make a contributing to your own SIPP for your employer to do the same.

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