Pension or Bricks and Mortar ?

rebecca1

I Hope this is in the right section to post ...
Husband and I run an IT business Ltd company. We have saved a considerable amount in the company account over the years.
I was thinking to free up a lump into a Pension fund. I have talked to an IFA about this and they think it is a good idea.


However, I don't know whether it would be advantageous to buy property instead. I am a bit nervous at jumping into a Pension scenario which you cannot get out of. Any thoughts on this anyone ?


Thanks Rebecca

Linton

It isnt a matter of all or nothing. It is important to have a spread of different investments. Investing in a pension has tax advantages especially if your company pays for it rather than you. Having additional investments outside a pension would give you greater flexibility if say you wanted to retire early or wanted to save for some other major long term expenditure.

A property also isnt a very flexible investment either as you cant sell a bit of a house when you need some income.

mania112

Payments into a pension are tax deductable for a LTD, so there's already a clear advantage.

Property can be good, but really only a secondary option after paying into a pension. Property has its own drawbacks and should be considered higher risk than a paying into a pension.

dunstonh

I was thinking to free up a lump into a Pension fund. I have talked to an IFA about this and they think it is a good idea.

Being a limited company, it makes sense as you can get money out of the company to reduce your corporation tax bill and avoid NI.

However, I don't know whether it would be advantageous to buy property instead. I am a bit nervous at jumping into a Pension scenario which you cannot get out of. Any thoughts on this anyone ?

But not nervous about being a landlord and needing around 5-8 properties?

atush

As a LTD company you should open pensions for both of you to save tax for both you and your company.

After you have built up a sum (and I presume you can use previous years allowances as well) you could if you wished, invest some of your pension into Commercial property.

Who owns your business premises? Your company could sell it to your pension?

Thrugelmir

Residential property is pretty tax inefficient as a savings route.

Freecall

The OP doesn’t give any specific details but does say :

‘We have saved a considerable amount in the company account over the years.’

Which implies that we are talking of a sum several times the size of one year’s profits.

This could prevent the savings in corporation tax not being easily realisable from a simple payment into their pension funds.

Still worth doing for the current year though.

rebecca1

Thanks for your replies everyone. Something to chew over but I will have to move quickly to get the allowance for the current year though.
Is there a formulae you work to in order to see how much you will need to invest for a pension? My IFA makes a charge which I am aware of for their services. But do I have to pay ongoing commission to arrange a pension?


Is it best to pay the minimum amount into a pension every year in order to reduce/wipe out my Corporation Tax bill?


Rebecca

atush

Your first call in the morning would be to your accountant who does the company returns. He is the one to help you minimize your tax, esp depending on how you take your earnings (ie mostly salary or dividends) and as regards your CT.

xylophone

Is it best to pay the minimum amount into a pension every year in order to reduce/wipe out my Corporation Tax bill?

Surely you have an accountant?

rebecca1

Yes I do have an accountant (ACMA Member in Practice) who does the bookkeeping, Yearly Company accounts and Payroll but does not get involved in giving advice on Corporation tax.


I started looking into how to reduce my Corp Tax bill myself, hence the Pension trail................


Thanks for your help


Rebecca