Windfall advice

huwy123

hello,

I will be selling some shares in a ltd company and am expecting to receive a decent windfall.

I was looking for advise in a number of areas:-
1. Claiming entrepreneurs relief
2. How to invest the money and reduce tax liabilities (e.g. pensions relief)

My financial goal is early retirement. Dealing with a windfall like this is new to me and I'm not sure where to seek advice - is this something for an accountant, tax advisor, financial advisor?

Cheers for any advice.
H

lisyloo

You can put up to £40k per annum into a pension and get tax relief (possibly more).
You can also you back several years.

You’d get better advice if you put up the amount, your income and how much you’ve already contributed to a pension this tax year.

It might be very simply solved. Depends on the amount really.

Pennywise

Pension payments aren't really a good way to reduce the capital gains tax, especially if you're only paying 10% CGT due to ER anyway.

You'd be better looking at EIS investments which give both income tax and CGT relief.

For the ER side of things, a tax accountant is probably best to talk to, also for finding out the pros and cons of the options, i.e. pensions, EIS, VCT investments etc.

Then once you have the framework of the tax planning, you'd then go to an IFA for advice with choosing which investment to actually invest in, i.e. which pension firm, which pension fund risk profile, review of the available EIS/VCT schemes etc.

You may, of course, find a firm of accountants that also have an in-house or recommended IFA so could get both types of advice "under one roof" as it were. But basically, they're different professions/specialisms, so you're unlikely to find someone who can give you proper tax advice AND advise as to which funds to invest it.

huwy123

Thanks for replying.

Estimated final figures for this tax year (obviously its not over yet)
Pay and dividends = **k
Employer pension contributions = £**
Personal contributions = *k
Salary sacrifice contributions = *k
Share sale £**k

huwy123

From what I've read, pensions relief tapers off the more you earn.

Even using carry forward allowance there seems to be little incentive to put money into a pension in this tax year.

However could I pay into it next tax year and get relief? Perhaps with carry forward?

BoGoF

That depends on next years earnings.

huwy123

Likely to be similar to this years but without the windfall

lisyloo

Pennywise wrote: »

Pension payments aren't really a good way to reduce the capital gains tax

Ok but with salary sacrifice can’t you get 20%/40% tax relief, 2%/12% employees NI, plus possibly 13.8% employees NI relief?

So is a possible suggestion to make large salary sacrifice and then live off the windfall?

That doesn’t directly save CGT but it’s a cracking deal either with it without the employers NI.
Obvs you’d need to hurry up for this tax year.

huwy123

Thanks lisyloo that is an excellent suggestion. From what I've just read I can sacrifice up to (or down to) the national minimum wage level. I will give this some though.

lisyloo

Yep the smaller of £40k or down to minimum wage (it’s a legal requirement for your employer to pay min wage).
There is also some carry forward allowance where you can carry forward pervious years allowances if want to put more than £40k in during one tax year.

Some employers pass on their 13.8% employers NI, some do 50% and some none.

This is relatively easy to check.
So for example if your deductions on your payslip was £100 and your pension contribution shown by your pension company was £113.80 (or 13.8% larger) then they are passing it on. The other option is of course to ask your finance department but sometimes it’s quicker just to check the figures yourself if you have online access.

Linton

huwy123 wrote: »

From what I've read, pensions relief tapers off the more you earn.

Even using carry forward allowance there seems to be little incentive to put money into a pension in this tax year.

However could I pay into it next tax year and get relief? Perhaps with carry forward?

????
Profits from selling shares are not normally classed as "income" or "earnings" for either tax or for pension purposes. Or is this some sort of employee share deal?