Imagine your company has a 31 March year-end.
Are you going to make an employer pension contribution in March 2023? Probably not. If you make the contribution in March 2023, it’s going to save corporation tax at 19%. If you wait one month (one day, even) until April 2023, it’ll save corporation tax at the new rate of 25% (albeit 12 months later, but it’s still a guaranteed 6% return).
Are you going to cancel a planned contribution this month, and wait until April 2023 and the greater tax saving? Probably not - on average, 25 months of tax-free investment growth would be likely to outstrip the 6% tax difference.
Are you going to make an employer pension contribution in February 2023? Probably not. If you wait two months until April 2023, it’ll save corporation tax at the new rate of 25% rather than 19%.
Are you going to cancel a planned contribution next month, and wait until April 2023 and the greater tax saving? Probably not, it’s fair to think that 24 months of tax-free investment growth will still have a fair chance of outweighing the 6% tax difference.
There’s a point somewhere in between where might choose to pause contributions, though. Over the long term, the profits in your company above and beyond what you pay yourself are going to be split in some fashion between pension contributions and building up reserves in the company. Mathematically, you'd ideally do the former when the corporation tax rate is 25% and the latter when it’s 19%.
Of course, this interesting dilemma presupposes that there will be no changes to the other rules and limits on pension contributions between now and 2023-24. Historically, that's often been a reckless assumption!
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