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Previously on "Legal Tax Mitigation - advice"

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  • mattster
    replied
    Originally posted by tomtomagain View Post
    In short, pension tax is complicated, and certainly not the free ride that some people assume. I see it as tax-deferred rather than tax mitigated.
    Deferred, yes, but also mitigated. 25% (of up to lifetime allowance) tax free, for starters, on retirement, and it should be possible to get the rest out at a lower tax rate than you would have paid at the time had you not put it in the pension, so there are definitely significant tax savings to be made. Also some inheritance tax benefits to some pension types if that is important to you.

    Leave a comment:


  • tomtomagain
    replied
    Originally posted by Eirikur View Post

    I wish I had this "problem"
    Well if you stop enjoying yourself, socialising, holidaying and buying the latest gadgets then you too can spend your evenings fretting about your hypothetical tax position by the time you hit 55.

    As stated by _V_ it's surprisingly easy to get close within a decade or two of saving. Over a 35 year working career easier still.

    It's just something to be aware of. Not something to rule your life.

    On a wider point, although minimising your tax is a sensible strategy, through a mix of ISA's, Pensions etc. But obsessively trying to get your tax rate to as low as possible can lead one down some dangerous paths ..... as the people on the "HMRC Scheme Enquiries" sub-forum will tell you.

    Leave a comment:


  • Ploptimus
    replied
    Originally posted by Crossroads View Post
    Let the tax tail wag the investment dog: VCT, EIS, SEIS...
    I am effectively doing this. My rough plan is as follows:
    • Years 1-5 invest 10k into EIS/SEIS each year
    • Years 1-5 reduce tax bill by 3k+
    • After year 5, reinvest profitable previous investments (top-up if required) to continue reducing tax bill by 3k/year
    Obviously early stage companies fail more often (there is also extra tax relief if they do go busto). DYOR and diversify in these investments as much as you can.

    Leave a comment:


  • _V_
    replied
    £40k invested every year at an average return (from stock growth, dividends and bond income) of 5% hits £1m after 15 years.

    So pretty much going to hurt a lot of pension millionaire IT contractors.

    Leave a comment:


  • Eirikur
    replied
    Originally posted by tomtomagain View Post

    You need to avoid breaching the lifetime allowance, currently £1m + a bit, because once you do you will pay tax of 55% on anything over that. And you pay tax on your withdrawals as though they were income ( over the personal allowance ).

    In short, pension tax is complicated, and certainly not the free ride that some people assume. I see it as tax-deferred rather than tax mitigated.

    £1m might seem a very big number, very far away, but a few years of 40k contributions and, hopefully, reasonable growth will start sending you towards that number.

    And of course, you have to hope that HMRC don't change the rules during your 30-year working life, which they have already done by slashing the lifetime allowance.
    I wish I had this "problem"

    Leave a comment:


  • tomtomagain
    replied
    Originally posted by shabak View Post

    Thanks! This is actually very good advice! I dont need much money atm and indeed putting 40k in the pension will save me tax that will get wasted by this politicians anyway.
    You need to avoid breaching the lifetime allowance, currently £1m + a bit, because once you do you will pay tax of 55% on anything over that. And you pay tax on your withdrawals as though they were income ( over the personal allowance ).

    In short, pension tax is complicated, and certainly not the free ride that some people assume. I see it as tax-deferred rather than tax mitigated.

    £1m might seem a very big number, very far away, but a few years of 40k contributions and, hopefully, reasonable growth will start sending you towards that number.

    And of course, you have to hope that HMRC don't change the rules during your 30-year working life, which they have already done by slashing the lifetime allowance.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by shabak View Post

    Thanks! This is actually very good advice! I dont need much money atm and indeed putting 40k in the pension will save me tax that will get wasted by this politicians anyway.
    Don't worry, they'll change the pension laws at some point and they'll get it someway or other.

    Leave a comment:


  • Paralytic
    replied
    Originally posted by Lance View Post

    you mean like education, healthcare, roads and infrastructure that make it possible for you earn this money? That waste?
    And don't forget about useless PPE and a world-beating track and trace system. And wallpaper.

    Leave a comment:


  • Lance
    replied
    Originally posted by shabak View Post
    wasted by this politicians anyway.
    you mean like education, healthcare, roads and infrastructure that make it possible for you earn this money? That waste?

    Leave a comment:


  • shabak
    replied
    Originally posted by mattster View Post
    Put as much as you can into your personal pension, even to the extent of living off savings if you happen to have some that aren't tax advantaged (i.e. not in an ISA).
    You can put £40k a year in, and top up 3 years of lower payments as well. Depending on how old you are, you might not even have to wait too long to start getting it out.
    Thanks! This is actually very good advice! I dont need much money atm and indeed putting 40k in the pension will save me tax that will get wasted by this politicians anyway.

    Leave a comment:


  • Crossroads
    replied
    Let the tax tail wag the investment dog: VCT, EIS, SEIS...

    Leave a comment:


  • mattster
    replied
    Put as much as you can into your personal pension, even to the extent of living off savings if you happen to have some that aren't tax advantaged (i.e. not in an ISA).
    You can put £40k a year in, and top up 3 years of lower payments as well. Depending on how old you are, you might not even have to wait too long to start getting it out.

    Leave a comment:


  • eek
    replied
    Originally posted by shabak View Post
    Hello: Is there any other legal tax mitigation allowance (beside pension) that you could recommend? Working for example Inside IR35 / Outside IR35 (Outside I know its expenses, electronics, subsistence etc).
    The only inside IR35 that I can think of would be salary sacrifice for an electric car - I don't know of any umbrella firms that offer it though.

    Leave a comment:


  • Lance
    replied
    - Live in the Cayman Islands.
    - If you listen to some of the advice on here you'd just earn less.
    - Outside IR35 will have less tax, but it's not just inside or outside. They are different ways of working.

    And be careful about the use of the word legal. There are plenty of perfectly legal activities that will look great at face value, but hurt in the long run.

    Leave a comment:


  • shabak
    started a topic Legal Tax Mitigation - advice

    Legal Tax Mitigation - advice

    Hello: Is there any other legal tax mitigation allowance (beside pension) that you could recommend? Working for example Inside IR35 / Outside IR35 (Outside I know its expenses, electronics, subsistence etc).

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