I don't believe it...
I am starting to sympathise with Victor Meldrew. Since I turned 50 more and more things seem to drive me mad. I spoke to a client the other day who told me that pensions were a waste of time and the only sensible investment was residential property. So I ran through some figures:
£80,000 profit from his business suffers Corporation Tax of £16,000 which leaves £64,000
He is already a higher rate tax payer so a £64,000 dividend will suffer tax of £20,800 which leaves £43,200 to invest in property.
Or he could put £80,000 straight into his pension (using carried forward allowances).
At retirement, he can withdraw £20,000 tax-free. Assuming he is then a basic rate tax payer the balance will suffer tax at 20%. That leaves £68,000 net in his pocket.
That is 57% MORE than the dividend route.
So he took my advice and made the pension contribution. I saved him £24,800.
Then he asked me to waive my £800 fee.
I don’t believe it!
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