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Retirement


Mnemonic said:
£50k via paye means £39,519 take home pay.
£50k via ltd Co means £44,358 take home pay.

at £30k it's £28k vs £24
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Those figures are all wrong. There is no way you can pay less than £6K tax on £50K through a company. Even if you take the maximum personal allowance, there is 19% corporation tax on the rest before you even think about paying a dividend and paying the 8.75% dividend tax.

Since Osborne's changes to dividend tax regime in 2015, the traditional advice (Ltd Company = lower tax) has been very suspect indeed. Subsequent shrinking of the dividend allowance by 90% has compounded the issue. A lot of tricks have been stopped too (e.g. selling personal business goodwill to the company to crystallise a capital gain then drawing down the value as a loan repayment.)

There are remain some tax advantages, but they generally only work if the owners aren't drawing out the bulk of the profits each year. E.g
* People with variable incomes can smooth it out so the peaks don't get taxed at higher rates.
* Or people who don't mind leaving the money in the company for years to take it out as a capital gain with entrepreneurs relief. However, HMRC has been moaning about this for a few years and might start challenging it.

Some employee benefits aren't fully taxed/NI'ed, which can sometimes work to the company's advantage; a sole trader can't employ themselves.

The conventional wisdom has been mostly wrong for a decade.

Not a tax lawyer. No warranties. DYOR. Etc.
 
stapler said:
Those figures are all wrong. There is no way you can pay less than £6K tax on £50K through a company. Even if you take the maximum personal allowance, there is 19% corporation tax on the rest before you even think about paying a dividend and paying the 8.75% dividend tax.

Since Osborne's changes to dividend tax regime in 2015, the traditional advice (Ltd Company = lower tax) has been very suspect indeed. Subsequent shrinking of the dividend allowance by 90% has compounded the issue. A lot of tricks have been stopped too (e.g. selling personal business goodwill to the company to crystallise a capital gain then drawing down the value as a loan repayment.)

There are remain some tax advantages, but they generally only work if the owners aren't drawing out the bulk of the profits each year. E.g
* People with variable incomes can smooth it out so the peaks don't get taxed at higher rates.
* Or people who don't mind leaving the money in the company for years to take it out as a capital gain with entrepreneurs relief. However, HMRC has been moaning about this for a few years and might start challenging it.

Some employee benefits aren't fully taxed/NI'ed, which can sometimes work to the company's advantage; a sole trader can't employ themselves.

The conventional wisdom has been mostly wrong for a decade.

Not a tax lawyer. No warranties. DYOR. Etc.
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Can’t disagree with any of that however there are numerous ways of benefiting via Ltd company that can’t be achieved by PAYE.
Legal yes but morally in the grey zone.
 
a1970man said:
My thoughts exactly.

I know a few 80 somethings and once you hit your mid 70s you are quite restricted in what you can do either because of yourself, partner or other situations.
My plan is to budget until 80, then as I get close to that age and can adjust my finances to suit.

I don't want to be a 90 year millionaire who's been living like a pauper for the last 30 years.
For me it's live in your 60s, manage in your 70s and 80+ is a bonus.

Yes, I checked a few years ago and my Aviva and Aon are protected at 55, which was a nice surprise.

I'm not quite ready to retire at 55, but it's nice to know that if I get a tap on the shoulder at work after 55 that my pension is available to me to live on which takes that stress out of finding work and living day to day.
Of course there would be an option of finding easy work and topping it up with tax free cash for a few years, but I'd have to get the spreadsheet out for that.
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Do you happen to know whether L&G are also protected?

I've already transferred the bulk of it out but there's a little bit there that with some growth may be enough for a year or two.
 
Just had our 6mth review last Friday. The pot has recovered well after trumps craziness at the start of the year, I'm a kick in the arse off hitting our number to pack in. It's such a rewarding feeling, kind of amazed I'll not be like my old man and still grafting well into his 60s. 6 ish mth for the Mrs, just over 12mths for me.
 
Shandy drinker said:
Theres become a large amount of two generations now being retired
As people live longer and retiring early
A few of my peers and this is the case
Probably unknown 20 years ago
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From the minimal research I did, this might br a positive thing Thatcher did.

It looks like legislation changed in 1988 to allow tax breaks and strongly push private pension, so now it is the norm. Not 100% sure on what it was like before, but I know my dad had a teachers pension with building since the 70s and my grandad had a pit pension, so it was not completely a new era.

But it seems that from the early 90s, good private pensions became more common. 35 years later, those who were 20 in 1990 are 55 now, and looking to retire to a comfortable life.

Repayment rather than bad endowment mortgages have probably contributed too.
 
mjs042 said:
Just another 40 years to go, haway
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If it helps, retirement planning has been a rejuvenation driver to my career.

I had been doing the same thing for years as a network engineer, got bored because I was not seeing new problems, and management was pissing me off.

I realised that moving into management would give me new challenges, allow me to combat bullshit and shave a couple of years off my career.

Got a job and said it felt like a 5 year post. After that time I was ready and moved. Was not sure about the new place, but said at least 2 years. 2 years on and I was poached by someone I was trying to angle my career towards.

Those moves came with pay rises securing early retirement sooner. Now 3 months in, I'm saying at least 3 years here but looking at what I need for my next move.

If not for retirement ambitions, I would still be bored on half my current wage.
 
archiesdad said:
This is the time to make hay. If I had my time over I'd start to save little and often so much earlier. The power of compound interest is a wonderful thing the earlier you start
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Depends on your circumstances though.
I've worked full time since I left school and never really had any spare cash to save until I was in my late 30s.
 
Devil71 said:
Depends on your circumstances though.
I've worked full time since I left school and never really had any spare cash to save until I was in my late 30s.
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True but there's always something you can do if you try, few quid here and there. It's not about 1000s when you are young. Just my opinion like.
 
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