Pension auto enrolment for Limited company contractors

We can’t deny it anymore, we are living in an ageing population and the government has become concerned that the UK’s work force is not putting enough away for their later years. As a result the automatic pension enrolment scheme has come into force. It started being implemented in October 2012 and all firms should be operating under this scheme by 2018.  But as a contractor how exactly will these changes affect you?

What is automatic pension enrolment?

The automatic pension enrolment scheme means it is compulsory for employers to automatically enrol all eligible employees in a pension scheme, although employees do have the option to opt out if they wish. To be eligible for auto enrolment employees must be:

  • Aged between 22 and State Pension age
  • Earn more than £10,000 a year
  • Work in the UK

How will automatic pension enrolment affect umbrella company contractors?

If you are contracting through an umbrella company then you are classed as an employee of the umbrella company that you are working under. Umbrella company contractors will be automatically enrolled in a pension scheme in the same way that employees will be, but you do have the option to opt out of the scheme.

For more information about contracting through an umbrella company you may want to visit our umbrella company hub page.

How will automatic pension enrolment affect Limited company contractors?

Limited company contractors may have already received a letter from The Pensions Regulator regarding how they are going to comply with the new auto enrolment scheme. The answer will depend on the structure of your Limited company, how many directors your company has and whether your company has any employees.

If your company has one director

If you are the sole director of your Limited company then your company will not have automatic enrolment duties because you, the director will not be classed as an employee as you are not working under a contract of employment.

You will however need to contact The Pensions Regulator in writing to inform them that you believe you should be exempt from pension auto enrolment, quoting your letter code, PAYE reference and Companies House number. Once you have received confirmation from The Pensions Regulator you will be able to continue with your pension contributions as you wish.

If your company has more than one director

If your Limited company has more than one director (for example a husband and wife) then the company will not have any pension enrolment duties, as long as none of the directors have an employment contract and the company has no other employees with a contract of employment.

If the company has a number of directors and only one has a contract of employment with the company then the company will still be exempt from pension auto enrolment.

As above if you believe that your company does not have any pension enrolment duties then you will need to inform The Pensions Regulator in writing.

If your company has shareholders

Company shareholders are generally not on the company payroll and do not have a contract of employment with the company and so are not classed as employees. If your company has no employees then you will typically be exempt from pension auto enrolment duties, but you will need to inform The Pensions Regulator of this in writing.

How do I inform The Pensions Regulator that my company is exempt from pension auto enrolment?

If your company does not employ any staff members then your company will not have any pension auto enrolment duties, as long as you meet one of the following criteria:

  • You are the sole company director with no other members of staff
  • Your company has multiple directors, but none have a contract of employment
  • Your company has multiple directors, but only one has a contract of employment
  • Your company has stopped trading
  • Your company has gone into liquidation
  • Your company has been dissolved

If one of the above applies to you then you will need to inform The Pensions Regulator that you are not an employer and are exempt from pension auto enrolment. To do this you will need to contact them in writing via the email address on your letter, if you have not received a letter yet you can contact them through their website via the following link: https://automation.thepensionsregulator.gov.uk/notanemployer.

When contacting The Pensions Regulator you will need to confirm the following:

  • Limited company name
  • Letter code - this is the 10-digit number, which can be found on all letters from The Pensions Regulator regarding auto enrolment
  • Employer’s PAYE reference
  • Companies House Number     

For more information about becoming a Limited company contractor you may find the following pages useful:

If you would like more information about how pension auto enrolment will affect you as a Limited company contractor, then please contact our new client services helpdesk on 0500 152500/01442 275789 or email jamie.thorpe@sjdaccountancy.com.   

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your Emails received by 4pm on any normal working day will be answered the same day. Should it be necessary to leave a telephone message it will be answered same day/following day latest or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.