New research has suggested that UK’s Small and Medium Enterprises (SMEs) are optimistic about the global economy and their role in it. If this applies to you and you have built up a healthy balance sheet, you may be considering how you can release money from your business in a tax efficient way.
Most business owners are aware how they can do this through dividend payments or by paying a higher salary or bonus. However, making a pension contribution may be something that you have not considered. We believe this may be an effective tax efficient option for you and would be keen to discuss the benefits with you.
£40,000 is the limit for individuals on what can be paid into a pension each tax year, but this is reduced for anyone with an annual income which exceeds £150,000.
However, any pension contributions made by the company (rather than the individual) will normally reduce the business’s overall profit, meaning the amount of Corporation Tax is also reduced. Unlike personal contributions, there is no limit on how much a company can pay into a pension scheme.
Please note, depending on the employee’s previous contribution history, there may be an annual allowance charge which we can calculate for you.
Both a short-term way of extracting profit and a long-term way of planning for retirement, paying into a pension is a great way to make the most of your business’s income.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen
For specific tax advice please refer to an accountant or tax specialist