Thousands of agricultural limited companies can follow the lead from other sectors and make employer pension contributions to reduce their corporation tax and National Insurance, says Stephen Berry at NFU Mutual, the specialist provider of insurance, pensions and investments.
More than a million limited companies in the UK have an accountancy year end before 31st March and many will be already taking action to reduce their future tax bill. There are more than 15,000 limited companies in the agriculture sector. They are no different, but are more likely to be run by directors and other employees from the same family.
Arranging employer pension contributions to directors and other employees now can be a tax-effective way of sharing success across the family. They can also reward key workers, such as farm managers, shepherds, dairymen and tractor drivers, who have played their part in the company’s results, points out Mr Berry.
Contributions to employees’ pensions are normally allowable deductions for Corporation Tax. The limits are generous too as they’re not limited to annual salary.
For any amount, a simple process called ‘salary sacrifice’ can reduce National Insurance bills for the company and its staff and will cut income tax for employees too. However, it’s important to remember that tax depends on individual circumstances and may be subject to change.
New pension regulations, set to come into force this April, will make pensions a much more attractive way for farmers to save for retirement as they can be used much more flexibly and with additional inheritance tax benefits from age 55.
As with all investments, the value of a pension fund can go down as well as up, so you may get back less than you invested.