With corporation tax rates due to rise, Kevin Read explains why OMBs may want to consider deferring directors’ pension contributions.
Tax-efficiency of company pension contributions
Employer pension contributions are very tax-efficient. They will become even more so from April 2023, when corporation tax (CT) is increasing for companies with profits exceeding £50,000. For stand-alone companies, the marginal CT rate on profits between £50,000 and £250,000 will rise to 26.5% from the current flat rate of 19%, while for profits above £250,000, it will become 25%.
The director of an OMB will typically draw only a personal allowance-level salary, which restricts their own personal tax-relievable contributions, due to the rules on net relevant earnings [FA 2004, s 189(2)]. Company contributions are not restricted in this way, but a director may suffer an annual