The client asks
I opened a self-employed keren hishtalmut in 2025, closed my business at year-end and became an employee and controlling shareholder of my company in 2026. Can I keep paying into the old fund? What if the standing order already continued?
Confirm your status, arrange company payroll contributions and ask the fund how to handle payments already received. Do not request an ordinary withdrawal to correct an error before checking its consequences.
1. The fund accepted the money. Does that mean the payment is valid?
Not necessarily. Technical acceptance does not establish eligibility for tax benefits. Where self-employed activity has ended and there is no remaining business or professional income, contributions should not continue under the former status without review. Notify the fund and assess the payments under the new circumstances. A business that remains active in a year with no profit is different from a business that has actually closed.
2. No self-employed income means no tax benefit at all?
Separate the deduction on contribution from the exemption on gains when withdrawal conditions are met. Without qualifying taxable income, there is no basis for a self-employed contribution deduction. That alone does not establish an automatic 25% tax charge on every gain. The contribution category, relevant ceilings and withdrawal conditions require separate assessment.
3. How should a controlling-shareholder employee contribute?
Arrange an account under the appropriate employee status with the company as employer, and coordinate contributions and reporting with payroll and the fund. The amount contributed is distinct from the company’s deductible expense. Generally, the company deduction is limited to 4.5% of qualifying salary, with a corresponding employee share of at least one third, subject to ceilings and conditions. A 7.5% employer / 2.5% employee arrangement may also be considered, but the extra employer portion is not necessarily deductible. Review company tax, employee taxation and withdrawal relief together.
4. The standing order kept paying into the old fund. What now?
Stop future payments that need to be regularised and collect contribution records, bank debits, the business closure date and payslips. Write to the fund explaining the status change and request its process for correcting or returning mistaken contributions, where available. Before acting, obtain confirmation of how principal and gains will be treated, whether tax certificates need correction and what happens to seniority. A refund is not automatic; an ordinary redemption request is not a substitute for this review.
5. Can the company make up contributions for earlier months?
Payroll and the fund should check the employment months, salary actually paid, agreed arrangements and annual limits. Any catch-up contributions and reporting corrections must be documented and processed through the company. A private transfer into the old fund, or merely relabelling an earlier payment, does not settle the issue. Act before year-end where possible, but 31 December is neither a guarantee that every error can be reversed beforehand nor proof that all remedies disappear afterwards.
6. What happens to valid contributions made in 2025?
Closing the business does not require withdrawal of the existing savings. Funds may remain invested, subject to investment risk and fees; returns are not guaranteed. Moving to a company does not itself reset seniority. Check the exact liquidity date and the tax classification in the fund’s records rather than relying only on the account-opening year. Using an older fund’s seniority for a newer fund is also conditional and requires the funds’ approvals, including checks on overlapping contributions and previous withdrawals.
What should you send the firm?
- Dated contribution records for the old fund.
- The self-employed activity end date and company employment start date.
- Payslips and any company contribution records.
- A seniority/liquidity statement and any written response from the fund.
Moving to a company also changes how contributions should be arranged. Review standing orders and savings during the transition, rather than discovering an outdated arrangement in the annual tax certificate.
Moved to a company while contributions stayed behind?
Let’s discuss your circumstances ↗General information reviewed on 8 November 2026. Not individual tax or pension advice, or a recommendation to withdraw funds. Treatment depends on the facts, applicable rules and the fund’s instructions. Send sensitive documents only through an agreed channel.