Financial Advice

Is it time to get your financial matters in hand?

An Early Financial Spring Clean?


February 2017

Many of us have had the joy of completing tax returns for the HMRC recently, just as many companies are preparing over the coming months for the “Year End” which for a large number of businesses is March or April. Early spring may be a time for a “spring clean” of financial matters – however, often some matters are forgotten, or their importance is not seen as priority. Whilst a company may use this time to deal with savings in corporate taxation and review arrangements within the company dependent upon any profits which may be recorded, many do not use this opportunity to review their arrangements with regards to benefits for themselves or their staff which may have a positive effect on their tax bill!

The last Autumn budget brought announcements to the change in National Insurance (NI) contributions, changes to Salary Sacrifice Pension Schemes, and another reduction to how much can be placed into pension schemes under certain circumstances - all arriving from April 2017.

Many Shareholders are already aware of some of the benefits of paying themselves dividends rather than a larger salary which can result in a significant tax saving.

Following changes to the taxation of dividends, many shareholders of companies may be facing an increased tax bill and a pension contribution could be the best way of cutting their overall tax bill whilst not reducing their income. Dividend payments and pension contributions made by an Employer do not attract NI contributions, but, dividends are paid from profits after Corporation Tax and may also be taxable in a Directors pay. If an employer pension contribution is paid, it ensures that the tax that would have gone to HMRC has boosted the individuals’ pension pot instead!

If there is staff bonuses to be paid before 5th April would the employees like some or all of it paid directly into a pension scheme? It can not only save the individual tax and NI, but Employer NI contributions as well. However, it is important to bear in mind the complicated pension contribution rules we have had enforced upon us over the last few Budgets in making these decisions!

Many companies have Group Life Assurance schemes (Death in Service) but have the benefits and premiums been reviewed recently as rates alter all the time in a fast moving market? Many Shareholders may not be aware that a flat sum assured is available now (different from the old 4 x salary basis) so a low salary with high dividends remuneration basis no longer matters. Worse still is a Group Life scheme where the Trust Deed has not been kept up to date - are the trustees still valid signatories?

The same can be said of Group Income Protection, Group Private Medical Insurance and Group Critical Illness schemes - whilst often schemes are put in place, reviewing the type of cover, amount of cover, the premiums, the options and the benefits can be easily forgotten!

A thorough review (Spring Clean) of all of your arrangements - not just the taxation of a company - can be extremely beneficial at this time of the year, not just for saving money but designing tax efficient benefits for both individuals and Companies. For further information on any of the above, please contact one of our team on 01473 408422.