How has your business faired through Covid-19? Is your firm trading ’normally’ again?
Unfortunately, some businesses might never be the same again. For those who have managed to resume normal service through hard work, loyalty, resilience and perhaps a sprinkling of good fortune, now is the time to re-evaluate where your profit goes, and how it gets there.
Before Covid-19, were you fully aware of how to minimise your firm’s tax liability? One significant way to do this is through the use of pension contributions. You can put up to £40,000 per annum into your pension (and in some cases up to £160,000) and benefit from tax relief. If the payment is made as an Employer Contribution (ie, from your business), it is:
- A tax-deductible business expense*;
- No National Insurance Contributions will be paid on the contribution;
- You won’t pay tax on the contribution as you would if it was paid to you as a dividend or salary.
It helps you to move your profit from the company, into your own name in a way that’s as tax efficient as it gets**.
If you are seeing your turnover creep up again and profits are starting to return, take time now to make sure you are making the most of your revenue by getting your pension arrangements right. If you’d like to know more, contact me at corryn.wild@three-counties.co.uk.
* Providing the contribution is ‘wholly and exclusively for business purposes’- your local inspector of taxes can provide guidance on this.
**When comparing profit extraction via salary, dividends and employer pension contributions.
Disclaimer: The above content does not constitute financial advice. Your circumstances may differ from those outlined and you should seek advice which is relevant to your own situation.
