Hi
I'm a long time reader of the forum and have picked up some valuable tips over the years.
I'm trying to help a family friend with their 2022 tax return. We have an appointment with his accountant next week, but hoping someone can sense check my thinking ahead of this. The return is for an individual in his early 60s who is going through a period of change. He drew down a previous pension at 60, has a PAYE contract through mid-2024 and has recently started offering consultancy through a limited company. At a high level his income for 2022 and 2023/2024 will look something like this:
2022: PAYE €30k, Rent €12k, ARF €7k.
2023: PAYE €30k, Rent €12k, ARF €7k. Also 100% shareholder of Ltd company with c.€25k profit.
2024: PAYE €15k, Rent €12k, ARF €7k. Ltd company profit up to €35k.
2025: No PAYE, otherwise similar to 2024. Couple of years away from state pension.
Appreciate we're up against time constraints for 2022, but I'm sitting down with him tomorrow to submit forms for a Zurich Standard PRSA through a broker I've used previously. We plan then to contribute €12k (40%) to this if everything is in place, with extended deadline of 15 November as he will be filing a Form 12.
While 2022 is straight forward (I hope!) my question relates to 2023. We plan to again contribute €12k from savings his PRSA next year which will help to shelter his PAYE income. For his company profit then, my understanding of 2023 change to employer pension contributions is that a director/employee should be in receipt of a salary in order for the company to make employer contributions. Or at least this is the more prudent approach should Revenue query anything. So what I'm trying to figure out is:
I'm a long time reader of the forum and have picked up some valuable tips over the years.
I'm trying to help a family friend with their 2022 tax return. We have an appointment with his accountant next week, but hoping someone can sense check my thinking ahead of this. The return is for an individual in his early 60s who is going through a period of change. He drew down a previous pension at 60, has a PAYE contract through mid-2024 and has recently started offering consultancy through a limited company. At a high level his income for 2022 and 2023/2024 will look something like this:
2022: PAYE €30k, Rent €12k, ARF €7k.
2023: PAYE €30k, Rent €12k, ARF €7k. Also 100% shareholder of Ltd company with c.€25k profit.
2024: PAYE €15k, Rent €12k, ARF €7k. Ltd company profit up to €35k.
2025: No PAYE, otherwise similar to 2024. Couple of years away from state pension.
Appreciate we're up against time constraints for 2022, but I'm sitting down with him tomorrow to submit forms for a Zurich Standard PRSA through a broker I've used previously. We plan then to contribute €12k (40%) to this if everything is in place, with extended deadline of 15 November as he will be filing a Form 12.
While 2022 is straight forward (I hope!) my question relates to 2023. We plan to again contribute €12k from savings his PRSA next year which will help to shelter his PAYE income. For his company profit then, my understanding of 2023 change to employer pension contributions is that a director/employee should be in receipt of a salary in order for the company to make employer contributions. Or at least this is the more prudent approach should Revenue query anything. So what I'm trying to figure out is:
- As his other income for 2023 will be approaching the 40% threshold, could this salary look something like €500/month and only commencing now in October? This would mean €1.5k salary from his company in 2023 and plan to make an employer pension contribution then of c.€20k in December 2023
- For any employer pension contribution, could this be made to the same PRSA which we are now setting up in respect of 2022 PAYE income? Or would a separate PRSA be required for this?
- For 2024+, does a Ltd company arrangement of c.€6k salary and balance to PRSA sound reasonable? Conscious that any meaningful increase in this salary will be subject to 40% PAYE.