Pensions for small business owners - overview

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Pensions for small business owners - how to maximise tax relief Simon Peters FCCA Peters Associates Ltd Certified Accountants [email protected]

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Outline of main tax reliefs for personal pensions and overview of current pension landscape

Transcript of Pensions for small business owners - overview

2. Sole traders & partnerships Payments into registered personal pension scheme Treated as paid net of 20% tax Additional higher rate relief available via tax return Example higher rate tax payer Payment of 800 Pension scheme claims 200 Reduce tax liability by 200 So effectively paying 600, for 1,000 pension contribution (40% gross relief) 3. Limits to your contributions Maximum (gross) restricted to lower of Annual relevant earnings (excludes dividend, interest, rent) 50,000 (40,000 2014) though can use unused relief from 3 previous years Lifetime allowance 1.5 million (1.25million 2014) If no earnings can pay up to 3,600 (gross) 4. Company directors personal pension payment options Type of payment Employee contribution Employer contribution Personal contribution National insurance payable Yes No No How paid Net Gross Net Limited to earnings Yes No Yes Tax relief to person or company Person/company Company Person Tax efficient No Yes Yes but limited by low earning 5. Keith Penny and Martin OBrien Pennymatters Limited Independent Financial Advisers Pensions what is the reality or.. what is the point 6. Can they help? 7. Pensions since 1970 1. The early days 2. Margaret Thatcher no regulation 3. Robert Maxwell 4. Equitable Life 5. Gordon Brown and Tony Blair 6. Pensions simplification! 7. Now 8. THE FACTS 1. People living longer 2. 2050 more population aged over 65 3. State pension age increasing 4. There is no money 5. The UK is in administration! 6. BUT THERE IS SOME GOOD NEWS! 9. TAX EFFICIENCY 1. Pensions are an onshore tax haven 2. If you plan for you and your staffs future you will get some money back off the government 3. No tax on growth on any approved asset held within a pension fund 4. No extra tax on income within fund 5. Income tax relief 10. Basics 1. Annual allowance 40,000 from 2014 2. Lifetime allowance 1.25m 3. Can carry forward 3 years 4. Tax relief for individual and or company 11. Opportunities and responsibilities Auto enrolment Age between 22 and state pension age Earning over 9,440 Phased in up to 2018 Must pay in http://www.thepensionsregulator.gov.uk 12. SIPP Self Invested Pension Plan wider investment choice, inc property purchase( commercial) Case study Marble Ideas 250,000 plus 60,000 borrow 50% for development Relevant life cover 13. Group Pension scheme 1. Employee loyalty 2. Example 3. 25,000 if I pay in 3% and you pay in 3% the net cost to the employee is 50 per month so 50 for 125 pension 4. OR 5. 48,000 same example 72 for 240 pension 14. SSAS Small Self Administered Scheme- Employer funded scheme which can allow a loan back to an employer Tax relief on contributions corporation tax is voluntary!? 15. More options ISAS THE OTHER ON SHORE TAX HAVEN Similar to pensions but 1 in 1 invested no tax relief on contributions Grow tax free - income CASH OR INVESTMENT Maximum 11,520 ( Cash 5,760) 16. Investment options key 1. Macro 2. Debt 3. Physical 4. Equities 17. CONCLUSION KEY CONSIDERATIONS ASSET ALLOCATION AND CHARGES DO SOMETHING OR.. RELY ON STATE, INHERITANCE OR PROPERTY