Limited company and pension planning

[Bill90.]

Hi everyone

As the funding of prsa's has changed to 100% of salary I will have to change tactics.

I've only just set up a limited company (literally) and I'm looking to structure it as efficiently as possible.

I already have a taxable rental income of 45k a year so this uses up all my tax credits. I won't need more money and am mortgage free.

I expect the limited company to have taxable profits of 40-50k

My plan was to pension most of this before the recent finance bill.

Now I'm wondering if I pay myself 20k salary and make a personal pension contribution will I receive 40% deduction or 20% as the un-earned income from the rental isn't allowed for pension payment?.

Could the company pay me 20k and make a 20k pension contribution for me and then I make a 4k (20% as I'm 35) contribution personally from my salary?.

Or would I be better off taking no salary, paying the CT on it and using a corporate investment account and looking at entrepreneurial relief and having it in my personal name in maybe 20 years.

I know the landscape will probably be a lot different in 20 years but just based on what we can do today.

Appreciate any advice
Kind regards.

 

[cally1990]

Hi everyone

As the funding of prsa's has changed to 100% of salary I will have to change tactics.

I've only just set up a limited company (literally) and I'm looking to structure it as efficiently as possible.

I already have a taxable rental income of 45k a year so this uses up all my tax credits. I won't need more money and am mortgage free.

I expect the limited company to have taxable profits of 40-50k

My plan was to pension most of this before the recent finance bill.

Now I'm wondering if I pay myself 20k salary and make a personal pension contribution will I receive 40% deduction or 20% as the un-earned income from the rental isn't allowed for pension payment?.

Could the company pay me 20k and make a 20k pension contribution for me and then I make a 4k (20% as I'm 35) contribution personally from my salary?.

Or would I be better off taking no salary, paying the CT on it and using a corporate investment account and looking at entrepreneurial relief and having it in my personal name in maybe 20 years.

I know the landscape will probably be a lot different in 20 years but just based on what we can do today.

Appreciate any advice
Kind regards.

This


"Could the company pay me 20k and make a 20k pension contribution for me and then I make a 4k (20% as I'm 35) contribution personally from my salary?.



If the company invoices let's 40k

Assuming no expenses or fees*

Then pay 20k as to a prsa account as 100% employer contribution

The remaining money

Draw 20k as gross salary

This will match 100% employee contribution to gross salary which is fine

Then with your 20k salary

Do

20% as employee prsa contribution (limit based on your age)

Taxable income for PAYE is 16,000( if you've allowances assigned then you are saving/avoiding 40% tax on 4000 which is a tax saving of 1,600 euro meaning the pension only cost you real money 2,600)

Taxable pay for usc 20k

Taxable pay for PRSI 20k

You'll take home the net

Total pension amount contributed 24k (20k employer plus 4k employee)


Given it's your first business and assuming you'll be the director , you maybe best to do a small direct debit from the company for the employer and employee amounts ,

See how you're performing and hold money in the company and do an employer AVC and employee AVC when you know you'll have the cash

You don't want to set the direct debits too high when you're only starting out as the payments will bounce on your business account or worse, take the funds for your employee taxes

So my advice would be do 10k employer and 2k employee as direct debits , assuming 20k turnover , and if you do better/invoice more then organise AVCs for the payments and draw the salaries at the same time ,

Don't This post will be deleted if not edited immediately with your business bank balance

You have it right though, but be very clear with your broker/financial advisor WHO is paying what (eg employer V employee) when filling out the forms

 

[Steven Barrett]

Or would I be better off taking no salary, paying the CT on it and using a corporate investment account and looking at entrepreneurial relief and having it in my personal name in maybe 20 years.

I know the landscape will probably be a lot different in 20 years but just based on what we can do today.

Appreciate any advice
Kind regards.

This isn't eligible for entrepreneurial relief.

As you have just set up your company and are on a low income, a Master Trust probably isn't any better than a PRSA. You are therefore better paying yourself and income and matching it with a PRSA contribution. You can make personal contributions from the money you paid yourself and it looks like get 20% tax relief.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Harper82William]

Hi everyone

As the funding of prsa's has changed to 100% of salary I will have to change tactics.

I've only just set up a limited company (literally) and I'm looking to structure it as efficiently as possible.

I already have a taxable rental income of 45k a year so this uses up all my tax credits. I won't need more money and am mortgage free.

I expect the limited company to have taxable profits of 40-50k

My plan was to pension most of this before the recent finance bill.

Now I'm wondering if I pay myself 20k salary and make a personal pension contribution will I receive 40% deduction or 20% as the un-earned income from the rental isn't allowed for pension payment?.

Could the company pay me 20k and make a 20k pension contribution for me and then I make a 4k (20% as I'm 35) contribution personally from my salary?.

Or would I be better off taking no salary, paying the CT on it and using a corporate investment account and looking at entrepreneurial relief and having it in my personal name in maybe 20 years.

I know the landscape will probably be a lot different in 20 years but just based on what we can do today.

Appreciate any advice
Kind regards.

As for the corporate investment option, it could be worth considering if you’re thinking long-term, but the tax landscape could definitely change in 20 years. For now, a mix of salary and pension contributions seems like a balanced approach.