Recently, lots of changes have been announced to pensions in Scotland and the United Kingdom.
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This can be tricky to navigate, so Daniel Murdoch at 57 North financial planning has broken it all down, to make it far more manageable.
Worry no more, here’s Daniel’s tips and tricks.
How will these changes impact you?
So the budget has come and gone once again and the noise and headlines have been made, but what does it all mean in the real world?
At 57 North Financial Planning, there are a number of clients who run their own businesses who have asked: “Dan, how can I get more of my earnings and profits out of my business in the most tax-efficient manner?” My simple answer has always been pensions, pensions pensions!”
But for many clients, they would also draw more funds out of the business by way of dividends. And with low Corporation tax, and high Dividend tax free allowances of £5,000 per annum, there was a logic to this approach.
Daniel added: “However, with budget increases to Corporation Tax, and severely reduced Dividend allowances from 2024, this has become less appealing. As this has coincided with the increase in dividends tax rates, we are already seeing it has affected clients thinking.
“Apart from an abolished Lifetime Allowance (LTA), we have seen an increase in the Annual Allowance–pensions have never looked more attractive!
“Historically it’s possible that pensions have had a bit of a ‘Boring’ reputation. However following the recent changes, pensions really are your most tax-efficient vehicle to draw funds from private companies. With corporation tax going from 19% to 25%, it just makes business sense that pensions are a core part of your long-term planning.”
What else is changing to pensions?
With the Annual Allowance (the amount you can contribute to pensions in anyone year) increasing from £40,000 to £60,000 from 6 April 2023 business owners have a great opportunity to save more for their retirement. The removal of the Lifetime Allowance from 6 April 2024 and the LTA tax charge from 6 April 2023, provides clients with more freedom around saving into their pensions without having to look over their shoulder at the potential tax charge.
Speaking of pensions, whilst there were no changes to the death beneficiary rules within pensions at the budget, the changes to the Lifetime Allowance makes it as relevant as ever to ensure you have your Expression of Wishes correctly completed.
This means your family can receive your pension benefits tax-free if you were to pass prior to age 75. Even if you die after the age of 75, the pot will not have suffered a Lifetime Allowance charge, so will again you will have passed on larger benefits to your surviving family. These changes will impact Scotland and the United Kingdom as a whole.
How can 57 North help with pensions advice?
At 57 North Financial Planning, they have extensive experience in working with clients to ensure they are both saving money, and reducing their tax bill where possible, now and in the future.
As part of this work, they partner with a number of accountants to work in conjunction with business owners to ensure the best route is planned out for them.
If you wish to find out more about this area, perhaps over a cup of coffee, just contact Dan on 01463 211311 or dan@57northfp.com. Also head over to the 57 North website for further information.