
Pensions offer UK residents a good way to build up large capital sums, with great tax incentives, which can be used to fund any period after the age of 55.
Many business owners draw small salaries in conjunction with dividends based on their profits - ‘net relevant earnings’ rules can mean that the maximum personal contribution to a pension is limited to the small salary drawn.
A great way of solving this issue is to establish a suitable ‘Director’s Pension’ to which the company may contribute on the Director’s behalf. Contributions are then deemed as employer payments and subject to different tax rules.
Payments are deductible for Corporation Tax and, in contrast to salary payments, are not subject to employers National Insurance contributions. There is also no tax on the Director, up to the annual allowance threshold.
Once established, the Director’s Pension scheme can be used to transfer funds from the company to their personal domain with no immediate tax consequence – this gives considerable tax planning advantages, in particular to higher or additional rate tax payers.
If you would like to hear about how we can help you, why not call Sharon, Tom or John for a chat? Levels and bases of and reliefs from taxation are subject to change and depend on the individual circumstances.
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Call Doncaster 01302 349218 or Rotherham 01709 828400.