Planning for an early retirement

Given the constant challenge of running a business, many company owners will dream of early retirement. Hard graft and grief should give way to the longest holiday of your life but instead of endless days on the golf course in a foreign land many business owners are forced to carry on working late into life, only to then retire in relative poverty. Members of the Construction Industry do not always apply that gift for hard work and good planning towards anticipating financial needs when the working life is done.

Without the benefit of a large company retirement package and with state provision woefully poor, you will be reliant on whatever nest egg you can build up for yourself. The good news is that, whilst many tax planning avenues are increasingly blocked by a government ever keener to maximise revenues, traditional pension planning has been given a new lease of life. Pension investment represents a perfectly legitimate way to slash your personal income tax and company corporation tax bills.

Directors can invest up to 100% of salary into pension personally (i.e. direct from the private bank account) but traditionally will prefer to take a low salary to reduce National Insurance. We all now have massively increased scope to invest if we get the company to fund on our behalf.

'A-day' pension reforms now mean that 'employer' contributions can be as much as £225k pa, representing a very tax efficient method of transferring money from company into personal hands. In good trading years a hefty corporation tax bill could potentially be reduced to nothing and these principles apply whatever level of remuneration, irrespective of the split between pensions and salary.

Your pension can become a central plank of your business by exploiting the freedom to own commercial property. You can hold your business premises via a Self Invested Personal Pension (SIPP), the pension charges your company rent, which in turn helps inflate the pension pot further.

Subject to minimum ages, you can also invest into the pension to cut your tax bill today, immediately withdraw 25% of the fund tax free and not even formally retire.

It's now clear that pension investment offers previously undreamt of tax planning opportunity for Business Owners whilst allowing you to build up a financial safety net for that well earned retirement. The challenge for us now is to seize that opportunity.

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