Contents
All change for pensions
A waste of time & money
Tax credit mess
Fuel up (shock)
Gimme shelter
Gulp! SIPPS
Paper or plastic?
Re: Mortgages
Bank the cheque
Subs beware
VAT's the limit
Dividend end?
The buck stops
Sack with care
Selling up
A matter of trust
We're watching
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One of the best tax-saving plans in recent years has been to incorporate a small business and pay out the profits as dividends instead of salary. The small company paying dividends could pay thousands of pounds less in tax than an equivalent unincorporated sole trade or partnership. Although Gordon Brown took some steps to reduce this advantage in 2004, it's still alive and well. One rule change which increased the benefit of this route was the abolition in 2001 of a requirement to pay pension contributions out of current earnings. For the last few years, tax relief has been available based on the best earnings figure for a six-year period. So the sole trade's last year before incorporation could justify pension premiums paid out of dividend income for the first five years of the company. This changes on A-day. In 2006/07, pension contributions will only qualify for tax relief if they are paid out of current earnings. You will be able to use the whole of your earnings - if you have enough cash from somewhere - rather than the percentage that has been allowed in the past. The top limit for a personal pension for a 50-year old in 2005/06 was £26,400 if earnings had been at least £105,600 in the last six years; the top limit in 2006/07 will be £215,000, but based only on the earnings figure of 2006/07. If you have pension policies and have been paying dividends out of a small company, it will be necessary to think about your best course of action next year. We will be happy to help. |
© Bayar Hughes & Co., 2010.