[avtur3]

If I have it right there was a change in 2016 which means if you became pensionable after that date it's about 5.8%.

In approximate terms that means deferring for a year you will have to collect your pension for ten years to break even. It didn't look like an attractive deal to me, better to spend the money while you are fitter was my thinking.

Rob P

And alongside the already increasing entitlement threshold the idea of deferring really doesn't look too inviting at all.

I was born March '56 and get to draw at age 66, Mrs Avtur, born November '64 and gets to draw at age '67 (they've said that shouldn't change!) but as you move further into the future then there's more chance of the entitlement age increasing

[avtur3]

..... It used to be the case that adjusting one's salary as above to ensure being credited without paying NI, and taking additional income as dividends was common practice for those working for themselves. However with the new tax laws limiting 'tax free' dividends that advantage has all but gone. I would need to check, however the circumstances in which taking a limited salary and dividends is beneficial is very much limited now...

Slight digression but the change on 'tax free' dividends was/is one of the worst particularly for us at the small end of the own business scale. One of those things that helped to make it a bit more worthwhile taking the plunge and doing your own thing.

[Miscellaneous]

...the idea of deferring really doesn't look too inviting at all.

Except it is not really deferring, it's just a change in legislation.

There's no choice for any flavour of govt in the future, a radical overhaul of pension provision is necessary. The recent changes to employer and employee provision is no more than box ticking. And with the demise of the defined benefits pension schemes it's a different ticking that should be grabbing the attention.

@rikur_ , I'm intrigued as to the reason your accountant has suggested £700pm is the way to go. I appreciate that's personal info, however since you brought it up...

[rikur_]

@rikur_ , I'm intrigued as to the reason your accountant has suggested £700pm is the way to go. I appreciate that's personal info, however since you brought it up...

You assume that I know . ... I've had to remind myself!
See table 1.2 here
£700 is almost the highest monthly salary without getting into the realms of paying NI (employee or employer). £702 and greater would attract NI. I could reduce to £503 and still earn qualifying years.

My recollection is that it's still about 10% better to have a low salary, and higher company profits and to take dividends and pay corporation tax, than take a larger salary and pay NI and income tax.

[Miscellaneous]

@rikur_ I'm not suggesting your accountant is wrong, however the goalposts have moved quite significantly on this. It may be worth double checking it is not so simply because it has always been.

I think there's only around the first £2k of dividends free of tax now. So if you have to pay income tax on dividends as well as corporation tax...

Clearly I don't know your accountant, however I do know I had one that I had to tell how it should be done. Didn't have him too long after that though.

[rikur_]

@Miscellaneous Thanks - I'll check. Albeit finances are Mrs R's domain professionally and domestically, so usually on the ball to work out how to get her hands on the money.

I *still* thought there was about 10% benefit of the low salary approach, as we recently went through the comparison . (simplistically corporation tax plus dividend tax, is still less than income tax plus employee NI plus employer NI) .

[Miscellaneous]

I *still* thought there was about 10% benefit of the low salary approach, as we recently went through the comparison . (simplistically corporation tax plus dividend tax, is still less than income tax plus employee NI plus employer NI) .

I'm sure it is if recently checked.

[JoeC]

Slight digression but the change on 'tax free' dividends was/is one of the worst particularly for us at the small end of the own business scale. One of those things that helped to make it a bit more worthwhile taking the plunge and doing your own thing.

Tories pulled the tax ladder up when too many of the hoi polloi started running their own businesses after the crash.

[Miscellaneous]

Slight digression but the change on 'tax free' dividends was/is one of the worst particularly for us at the small end of the own business scale. One of those things that helped to make it a bit more worthwhile taking the plunge and doing your own thing.

Agreed, my recollection is that once the business was making money it made little difference to the total tax paid, but was an incentive for the directors'. As you say, particularly advantageous when building the business.

Seems there's still a benefit to be had though.

[matthew_w100]

I'm using it because I am salary sacrificing into my company pension pot. Thereby saving NI and higher rate tax. Turns out I CAN live on a grand a month! But I retire mid-year, and need to know how much I need to retain for the year to count.

[GAFlyer4Fun]

I think they just made stuff up to fill gaps in their data...

The website is simple to use and very clear, albeit the underlying data is questionable.

Sadly I too have little confidence in the hmrc computer system calcs based on the shambles that has followed mandatory use of the RTI system and the incorrect data the PAYE system shows me.

They might get it right one day, but then some other day there might be an IT upgrade of some description that breaks it. One reason I keep paper records for some things.

[rikur_]

little confidence in the hmrc computer system

Ditto. They made a mess of my wife's records. Speaking to my accountant at the time, that was the new normal.
IIRC at least one issue was that historically they had two separate systems for PAYE people and self-assessment people that have now been merged, but if you'd straddled both worlds in your career, the merging was far from perfect.

[Paul_Sengupta]

I was shocked when I logged on to find that I only need another 7 years of contributions. I thought I was still young!

[PaulB]

That might be the old scheme... I’m not young and thought I’d made enough contributions, but apparently, I was wrong.

[Paul_Sengupta]

It says I've made 29 years so far.