• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

pensions for contractors ... no brainer?

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    #11
    If caught by IR35, LtdCo contributions into pensions are a humungeous no-brainer as you save an extra 20%-odd on the NI portions.

    For inside IR35, it isn't quite so cut and dry, but probably still a good thing for the arguments listed above.

    The biggest argument for ISA's is that you have total access to your money. With a pension, you have to kiss goodbye to anywhere between 30%-75% of the capital (depending on your draw-out strategy), although you do get the income on that capital.

    Comment


      #12
      how does the draw-out strategy work?

      Comment


        #13
        You could have tax relief if you have a pension from the company.

        Originally posted by hgllgh View Post
        If you compare the net result of pension and ISA investment its approx the same:-

        As an illustration lets assume an investment gain of 30% for a basic taxpayer.

        PENSION:-
        £78 net invested gives an investment of £100
        Increase by 30% goes to £130
        Now if the income is taxed at basic rate...
        £130 becomes effectively £101.40


        ISA:-
        £78 net invested in an ISA
        Increase by 30% goes to £101.40


        So for a contractor a pension is a no brainer as you don't get the following with an ISA ...


        [1] pension tax relief at 22% going in but pay nothing or just 10% coming out (for income below 10K per year)

        [2] reduces your corporation tax liability without affecting the amount of tax/ni contributions

        [3] You get 25% tax free lump sum on retirement


        I'm not saying contractors shouldn't have ISA's ... but we should have a pension preferably a SIPP?

        Comment

        Working...
        X