As a small business owner whether you are running as a sole trader or limited company there are benefits to investing in your future with a private pension.
I come across so many business owners who don’t have a pension at all because it has always been bumped down their to do list.
I get it, your days are filled with managing the day to day operations, building the business and driving the growth. Every year you think ‘this year I’ll set up my pension’ and it just never happens.
Personal pensions may not be the most exciting topic or way to spend your money.
But if you are looking to retire at some point and have a lifestyle that you’ve worked so hard to create then you’ll need a way to pay for it.
Making pension contributions offer significant advantages for both your retirement and your business’s financial health.
So why is paying into personal pensions is a smart move for small business owners and entrepreneurs?
1. To Secure Your Financial Future
One of the most compelling reasons to invest in a personal pension is for the financial security in your retirement years.
Unlike employment with auto-enrolment and employer-sponsored retirement plans, small business owners often lack access to such benefits. Therefore, it’s essential to take personal responsibility for your retirement savings.
A personal pension allows you to build a substantial nest egg over time, ensuring you have the financial means to maintain your desired lifestyle during retirement.
By regularly contributing to your pension fund, you’re investing in your future self and reducing the risk of financial hardship in your golden years.
2. The Tax Benefits
Apart from securing your future, personal pensions offer attractive tax benefits that can significantly impact your business’s bottom line.
Tax Relief on Contributions
When you make contributions to your personal pension, you receive tax relief from the government. This means that for every pound you contribute, the government adds a percentage on top of it. This added amount is determined by your income tax bracket.
For example, if you’re in the basic rate tax bracket, every £80 you contribute to your pension will be topped up to £100, thanks to the 20% tax relief. This means you get an instant boost to your retirement savings without paying additional taxes.
Reduced Corporation Tax
As a small business owner, you can reduce your company’s taxable profits by making contributions to your personal pension. These contributions are considered a business expense, which means they can be deducted from your business’s taxable income.
By reducing your taxable profits, you lower your overall corporation tax liability, leaving more money in your business to reinvest or use as working capital. It’s a tax-efficient way to support your retirement savings while benefiting your business’s financial health.
Flexibility and Control
Personal pensions offer flexibility and control that can be especially advantageous for small business owners and entrepreneurs. You have the freedom to decide how much you contribute and when you make those contributions. This flexibility allows you to adapt your pension contributions to your business’s cash flow and financial performance.
As a small business owner or entrepreneur, investing in a personal pension is a wise financial move. It not only secures your future but also offers significant tax benefits that can positively impact your business’s financial health.
By taking control of your retirement savings and leveraging the tax advantages, you’re not only preparing for a comfortable retirement but also optimising your business’s financial strategy.
Don’t delay—start exploring your personal pension options today.
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