Auto enrolment was introduced through legislation in 2008 as a way of addressing the issue of employees not saving enough for retirement. It requires employers to automatically enrol all their eligible employees into a workplace pension scheme and make the appropriate contributions to the scheme.
The date the pension needed to be up and running varied depending on the size of the company, for the largest companies it began in October 2012 and it now applies to all companies.
Who is eligible?
Whether full time or part time, all employees should be enrolled if they:
After enrolment, employees can choose to opt out of their employer’s pension scheme.
By February 2018 all employers must have set up a suitable scheme and enrolled their eligible employees into it. If you have missed the deadline, are a new company or are unhappy with your current scheme then we can help.
Investing Company Money
It is vital for a company to hold enough working capital that is accessible and the company bank account is an ideal place to hold it. However, many companies tend to sit on larger cash reserves than they need. At the time of writing (April 2023), the rate of inflation is much higher than the interest rates currently available, which means this money is likely to be depreciating in value.
There are tax-efficient alternatives available such as OEICS, Unit Trusts and Investment Bonds. We recommend you always seek financial advice to ensure that the route chosen is the best fit both from a taxation and risk perspective.
Tax-efficient Company Profits Extraction
In the UK, the main rate of corporation tax rate is 25% (the small profits rate is 19%). The most basic approach of extracting company profit is through paying yourself a low salary and taking the rest as dividends. The optimum salary to take will depend on any other income you receive and whether you employ other staff or not. It is normally wise to take a salary of between the National Insurance Lower Earnings Limit and the Primary Threshold, this means that you protect your entitlement to future state pension and benefits without paying any personal National Insurance.
A pension is also a tax-efficient way to extract money from a business. Any company contributions to your pension are treated as a business expense and therefore free from Income Tax/Corporation Tax and National Insurance.
Buying Commercial Property via a SIPP
A Self-Invested Personal Pension is a flexible personal pension plan that provides choices on the type of investment when it comes to saving for retirement. SIPPs provide an investor with the opportunity to directly invest in the UK commercial property. This can be very convenient to the self-employed/company owners who want to use SIPP to buy a property for their business premises.
When using a SIPP to purchase a commercial property that will be used for your business, rent payments at commercial rates have to be paid to the SIPP. However, rent is an allowable business expense and therefore it will reduce the amount of taxable income for your business.
The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.