Are you making the most of your pensionable allowances?
As a business owner, it’s more important than ever to make the most of your pensions and ISAs ahead of tax year-end.
If you want to enjoy retirement at a young age, it’s becoming clearer that you’ll have to rely on more than the State Pension.
There are three main factors that affect how much you have in your pension when you retire:
- The time you invest for (typically as long as possible).
- How your investments perform.
- How much you put aside.
It’s important to review your pensions regularly. Get in touch with our team for advice!
So, how can you take action to build up your pension savings while saving on tax?
Invest your business profits!
When you have a limited company, you can opt to make contributions as an employer pension contribution from pre-tax company income, rather than making a personal pension contribution as an employee.
This offers substantial benefits. For instance, if you’re a higher-rate taxpayer, converting £1,000 of company profits into dividends results in a net payment of £536.63 in your bank account. Opting for a pension contribution ensures the full £1,000 is deposited into your pension, providing an impressive 86% return by reclaiming income and corporation tax.
Pension contributions are among the few remaining tax breaks available to limited companies, so this is definitely worth taking advantage of!
Another benefit of paying through the company is that employers aren’t required to pay National Insurance Contributions (NIC) on pension contributions.
What you will need to do.
You’ll have to demonstrate to the HMRC that these contributions are ‘wholly and exclusively’ for your business. This is usually a straightforward process. This primarily means ensuring that the pension contributions you make are ‘commercially reasonable’ for the work you are undertaking for your company.
Additionally, maintaining parity with contributions made for others in similar roles within the business is crucial.
So, the question is… Why wouldn’t you?
If you aren’t making the most of your pension, maybe it’s time for a re-think! Regular reviews with us will remind you to take advantage of reliefs and allowances wherever you can.
We’re more than just an outsourcing service; we’re your friendly and professional ally in regaining control over your finances. With a blend of experience and the contagious energy of our team, we guarantee every client receives not only professional expertise but also a personalised touch that makes all the difference.
Say goodbye to late-night number crunching and hello to more free time!
Located in Hitchin, Hertfordshire, our dedicated team of experts is here to simplify accounting, bookkeeping, and payroll for businesses across the UK. Our team is here to support you – give us a call on 020 7183 8241.