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21/03/18 21:15
SIPP your way to enhanced savings
As we approach the end of the tax year on 5 April, I know many of you in business are thinking of what you can do to minimise your tax liability for 2017-18. There is a limit to how many commercial vehicles you can buy, or how much plant and machinery you can surround yourself with. Such purchases qualify for 100% relief of the capital cost as a deduction from your trading profits, which is fine and dandy, and everyone is happy to an extent, but they have one major disadvantage - you are acquiring depreciating assets which will have no value in 10 years or less.
Is there another way? A means by which to obtain the same tax relief for the same spend, yet to acquire an asset that will hopefully maintain or even grow its value? Guess what? There is! It's called your pension scheme, and an amazing number of self employed individuals do not take advantage of the tax relief available on what is - in effect - a personal savings scheme.
There are managed Pension Funds, run by Insurance Companies. You invest, they manage, you depend on their performance. That may not appeal to everyone, and therefore I draw your attention to the option of running your own Pension Fund.
Welcome to the Self invested Pension Plan!
A Self invested Pension Fund is incredibly flexible - the money you put in it can be held in cash, stocks, bonds, commercial property, even agricultural land, or any combination of these. Make sufficient contributions over time, and you can acquire your own business property. Your Pension Fund is a tax free zone - its income is untaxed, including rents.
It is only taxable on you when you extract income from your Pension Fund, and this can be planned flexibly to suit your circumstances. A SIPP is outside your Estate for Inheritance Tax purposes, and you can Will it to your spouse tax free.
SIPPS are so flexible that it's surprising they are not used more often.
Contact me if you would like to explore.
Written by:
Norman Elliott FCA
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