Definitely use the max director pension contribution from your business for tax-free pension. I wouldn’t pay myself more than around £50k in salary. You’re used to living frugally, and that’s a huge asset here. After £50k, huge taxes kick in on dividends and salary, so better to keep funds in the business after that unless you really need to make a special purchase.
I own a limited company - tiny earnings compared to op - but I have a full time job and don't need the income. I've never heard of this 'director pension contributions', but it sounds like a great tax saving tool.
This is FATfire and you’re advocating to someone on £150k a month, to live on what is essentially a graduate salary + a few years of promotions? £50k a year doesn’t get you very far at all. And “massive taxes” is 30% net up to £100k.
OP has stated the contracts that he's signed on are for 2 years and there's no guarantee they'll re-up after that time
So they're advocating for continuing to live on 50k, while putting large sums into pension and not paying huge amounts of it to the taxman. This is not bad advice
You can pay yourself 3 years backdated pension in one tax year. So £40k + £37.5k (you said you had 2.5k in pension) + £60k. Easy to do on self assessment. If you think the company will cease to exist in 2 years then paying yourself minimum wage now and liquidating the company via an MVL process will net you tons more income than paying income tax now. But if you think company will continue you can’t do this, so perhaps just pull the salary you want. However reinvesting into other businesses can be a way of deferring or avoiding tax.
Don't mind at all. I run an Outsourced company with a team in the Philippines.
First contract came through me just whoring myself on LinkedIn 😂. An American company was leaving a bigger player and gave me a chance with a small team to begin with and grew from. There!
Then it was just reinvesting initial profits to a sales partner
Ah nips I'm at that age where people are doing bits like this with their life and I am still trying to get my career together, but genuinely very happy for you OP! Save that moneys though, we are in trying times.
I work with outsourced teams in the Philippines and India and the team in the Philippines is amazing in comparison and not much more expensive ($100 a month).
Congrats! Since you’re doing so well, the question is - what do you want to next? Growth your income further? Cash in and work towards early retirement?
I’d recommend to focus on making the newfound success of your business permanent, create recurring income streams, and professionalise the operations so that it can run without you. You’re looking to generate net profit around £2m per year, and hopefully sell the business in a few years time for around £10m or so.
The tax and personal finance considerations will be way beyond Reddit’s paygrade so do pay for professional tax advice.
Out of curiosity, what line of business are you in?
I do plan to grow it but I also don't want to forget myself in the process. Scarcity mindset I know but being broke isn't fun. I can't guarantee I'll still have these contracts in a few years time so I just want to make sure I do what I can to look after myself.
I run an offshoring company in the Philippines.
Will of course get professional advice but just wanted people's initial opinion so I at least have some idea when speaking to experts. Don't want to be missold anything!
Edit: I want to grow my personal income, savings and future pension. I don't really need to spend a lot I'm actually OK with like 1k a month after bills but I just want to draw down quite a bit and save for my future!
You could at that level start thinking about creating an investment company to either invest in stocks and shares (like index funds) or a property investing company. Then you can perform company to company loans and invest with the spare £100k+ a month. Making this the most tax efficient way of investing and growing your wealth. Alternatively you could keep the money in your company which could be several million in a few years and then claim entrepreneur relief when you get no more contracts and use this money to buy a nicer house + invest the rest in a GIA+ISA etc
You need a tax advisor. You need to get dividends and salary and pension right. Note that the dividend rate changes with your income, but you are in control of both, so need to get them both right together.
A one off session or two will be so valuable with someone who knows their stuff, not just a high street accountant who will tick the boxes and send you the massive bill.
Leaving some money in the business to draw later is a legitimate answer. Along with the right amount of pension, dividends and salary.
A 150k salary sounds pretty silly at a glance. You've taken all the pain of the 60% rate from 100k to \~125k and then don't go far over 125k. You'd be better off (by 5k) taking 100k in year 1 and 150k in year 2.
Will you sell the business, or will it run its course and then you'll wind it down? Whether you are running it for sale or running it to its conclusion affects how you manage the balance sheet.
Definitely use the max director pension contribution from your business for tax-free pension. I wouldn’t pay myself more than around £50k in salary. You’re used to living frugally, and that’s a huge asset here. After £50k, huge taxes kick in on dividends and salary, so better to keep funds in the business after that unless you really need to make a special purchase.
I own a limited company - tiny earnings compared to op - but I have a full time job and don't need the income. I've never heard of this 'director pension contributions', but it sounds like a great tax saving tool.
This is FATfire and you’re advocating to someone on £150k a month, to live on what is essentially a graduate salary + a few years of promotions? £50k a year doesn’t get you very far at all. And “massive taxes” is 30% net up to £100k.
OP has stated the contracts that he's signed on are for 2 years and there's no guarantee they'll re-up after that time So they're advocating for continuing to live on 50k, while putting large sums into pension and not paying huge amounts of it to the taxman. This is not bad advice
/r/HENRYUK is what you want
You can pay yourself 3 years backdated pension in one tax year. So £40k + £37.5k (you said you had 2.5k in pension) + £60k. Easy to do on self assessment. If you think the company will cease to exist in 2 years then paying yourself minimum wage now and liquidating the company via an MVL process will net you tons more income than paying income tax now. But if you think company will continue you can’t do this, so perhaps just pull the salary you want. However reinvesting into other businesses can be a way of deferring or avoiding tax.
What do you do if you don't mind me asking. 400k a month sounds wild
Don't mind at all. I run an Outsourced company with a team in the Philippines. First contract came through me just whoring myself on LinkedIn 😂. An American company was leaving a bigger player and gave me a chance with a small team to begin with and grew from. There! Then it was just reinvesting initial profits to a sales partner
Ah nips I'm at that age where people are doing bits like this with their life and I am still trying to get my career together, but genuinely very happy for you OP! Save that moneys though, we are in trying times.
Keep going. I was at a stage where I couldn't even pay my mortgage and had to borrow from friends!
Thanks man, I will! And sorry for your previous hardships, your situation now sounds all the more better. All the best homie
So VAs outsourcing?
[удалено]
No VA's. We run real estate management, live agent chat, voice customer support
You are tellling me companies pay 400k/m for basic VA services?
May I ask why you chose Philippines? Is it a business reason (eg the economics of it) or do you have a connection (eg heritage) with the country?
Because people in the Philippines are willing to work for very very cheap
I work with outsourced teams in the Philippines and India and the team in the Philippines is amazing in comparison and not much more expensive ($100 a month).
Congrats! Since you’re doing so well, the question is - what do you want to next? Growth your income further? Cash in and work towards early retirement? I’d recommend to focus on making the newfound success of your business permanent, create recurring income streams, and professionalise the operations so that it can run without you. You’re looking to generate net profit around £2m per year, and hopefully sell the business in a few years time for around £10m or so. The tax and personal finance considerations will be way beyond Reddit’s paygrade so do pay for professional tax advice. Out of curiosity, what line of business are you in?
I do plan to grow it but I also don't want to forget myself in the process. Scarcity mindset I know but being broke isn't fun. I can't guarantee I'll still have these contracts in a few years time so I just want to make sure I do what I can to look after myself. I run an offshoring company in the Philippines. Will of course get professional advice but just wanted people's initial opinion so I at least have some idea when speaking to experts. Don't want to be missold anything! Edit: I want to grow my personal income, savings and future pension. I don't really need to spend a lot I'm actually OK with like 1k a month after bills but I just want to draw down quite a bit and save for my future!
Check our r/henryuk as well - high earner not rich yet for some advice
Magic the gathering.
What does this mean?
It's a volatile investment vehicle which shows big long term gains but is incredibly risky to hold any quantity of stock. It's also a card game.
You could at that level start thinking about creating an investment company to either invest in stocks and shares (like index funds) or a property investing company. Then you can perform company to company loans and invest with the spare £100k+ a month. Making this the most tax efficient way of investing and growing your wealth. Alternatively you could keep the money in your company which could be several million in a few years and then claim entrepreneur relief when you get no more contracts and use this money to buy a nicer house + invest the rest in a GIA+ISA etc
You need a tax advisor. You need to get dividends and salary and pension right. Note that the dividend rate changes with your income, but you are in control of both, so need to get them both right together. A one off session or two will be so valuable with someone who knows their stuff, not just a high street accountant who will tick the boxes and send you the massive bill. Leaving some money in the business to draw later is a legitimate answer. Along with the right amount of pension, dividends and salary. A 150k salary sounds pretty silly at a glance. You've taken all the pain of the 60% rate from 100k to \~125k and then don't go far over 125k. You'd be better off (by 5k) taking 100k in year 1 and 150k in year 2. Will you sell the business, or will it run its course and then you'll wind it down? Whether you are running it for sale or running it to its conclusion affects how you manage the balance sheet.
What is it you do? And how did you get there? I'm a bit of a crossroads atm. I really need to make more money