31 December 2012

Financial Planning Ideas for Business Owners - 3

A final group of ideas - mostly applicable to limited companies...

Get More Benefit from your Pension Scheme
Some pension schemes will support loans to the business or could be used to purchase business premises, for example.

Reducing Tax on Business Sale
Capital Gains Tax (CGT) and Inheritance Tax (IHT) may be applicable when a business is sold. Planning ahead can reduce these liabilities. This might include an EIS scheme to defer CGT, or a Business Property Relief scheme to reduce an IHT liability.

Will and Lasting Power of Attorney
... but that’s not a financial planning idea! Actually it is; defining what happens if you die or are unable to make your own decisions could make a big difference to your financial future and that of your family.

Review your Defined Benefit / Small Self-Administered (SSAS) Pension Scheme
Older pension schemes may be in serious need of a review. This could cover:
- Investments - is there a better approach?
- Scheme liabilities
- Checking whether the trustees are fulfilling their legal obligations

17 December 2012

Financial Planning Ideas for Business Owners - 2

Some more ideas - mostly applicable to limited companies...
Make Pension Contributions using Salary Sacrifice
If you're not doing this already, you probably should be...! Agree with staff a reduced salary in return for increased pension contributions. NI will not be required for the pension contributions making everyone a winner (except HMRC).
Key Person Cover
The potentially disastrous consequences of losing a key person through death or illness can easily be insured against.
Shareholder Protection Insurance
If a shareholder dies who will own their shares? This policy, along with a separate agreement, provides the funds to buy back the shares - normally from their family - ensuring business continuity and providing a monetary benefit for the bereaved family.
Tax-Efficient Inward Investment
Investors in your company may be able to benefit from the Enterprise Investment Scheme (EIS), providing significant Income Tax and/or Capital Gains Tax benefits.

Start a Group Life Insurance SchemeThis could be a valuable employee benefit, even if it only applies to two or three directors. It may be cheaper than individually underwritten policies such as Relevant Life Policies, particularly if there are health issues.


12 December 2012

Financial Planning Ideas for Business Owners - 1

These ideas generally apply to limited companies...

Invest Excess Cash on Deposit
An easy one to start with...If you have cash on deposit and you find that a proportion of it is never needed for running the business, higher returns may be available by investing it.
Profit Extraction from the Business
With the current limits on both pension contributions and pension benefits, an alternative might be to pay a large dividend and pay the proceeds into an EIS scheme and obtain Income Tax relief.
If pension contributions are feasible and the Minimum Income Requirement is met at the point of retirement, Flexible Drawdown may be used to obtain some of the pension value as a lump sum. If income is not immediately required, an EIS investment can provide Income Tax relief.
Cheaper Life Insurance - Relevant Life Policies
The business pays the premiums as a business expense, but the benefits are for the individual (or their family). This provides an alternative to pension-based death-in-service benefits where there might be limits on pension contributions, or there are too few people in the pension scheme to make this possible, for example.
Be Prepared for Auto-Enrolment Pensions
Even if your “Staging Date” is some way off, thinking ahead is vitally important - budgetting for the compulsory contributions, selecting a pension scheme, etc..
more to come...

3 December 2012

Will we get a flat rate State Pension?

A flat rate State Pension of £140 per week has been much-trailed, and was confirmed during the recent party conference season.
This would replace the current, rather complicated, two tier system which has a Basic State Pension which everyone with 30 years of National Insurance contributions gets in full at £107.45 per week, and a State Second Pension (previously called SERPS) which depends on earnings and on whether you have been contracted out (and if so, for which years).
But as usual with pensions, the aim of simplifying things gets hijacked when you look at the detail. For example, how do you introduce it? In particular what do you do about people who already get more than that flat rate because of higher earnings?
And then there is the issue about those who are contracted out. They get the equivalent of the State Second Pension via their main pension provider. Would their pension payments be cut as well?
The alternative is a generation-long transition period to avoid disadvantaging existing pensioners. Difficult decisions for the Government,  but there is a desparate need for simplification. Without it pensions will continue to be seen as obscure and best avoided, when in fact they are generally the best hope for a reasonably prosperous retirement.

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