View more on these topics

SOFA AWARDS

Tony and Mary each own 50 per cent shareholdings in two companies that they established 10 years ago, Ynot Ltd and Yram Ltd. Both have a financial year end of June 30 but there the similarity ends. Ynot has had another bad year as one of its major customers switched supplier. As a result, Ynot&#39s pre-tax profits will be around £40,000. On the other hand, Yram has had a very good year and is likely to turn in pre-tax profits of an estimated £200,000.

Tony and Mary have decided that all Ynot&#39s net profits will remain in the company this year and they will not receive any bonuses or dividends. Instead, they will focus on using £50,000 each of pre-tax profits from Yram for their own benefit. They are both concerned to build up funds for their retirement.

Tony and Mary are both higher-rate taxpayers in their mid-40s and members of Yram&#39s small self-administered scheme. Based on their current remuneration and level of funding, single contributions could be justified this year of £20,000 for Tony and £25,000 for Mary. For every £1,000 increase in remuneration, Tony&#39s annual SSAS contributions could be increased by £700 and Mary&#39s could be increased by £650. They would like your advice on the following:

1: If they were each to use £50,000 of pre-tax profit to pay a dividend or bonus, how much would they receive after tax and National Insurance contributions? IR35 is not an issue.

2: Assuming they each use the full £50,000, what would be the optimum mix of bonus and dividend to produce the biggest net cash figure?

3: What are the relative advantages and disadvantages of making SSAS contributions rather than investing net cash personally?

4: If they wished to maximise their pension contributions, what would be the optimum mix of bonus, pension contribution and dividend?

5: What combination of bonus, dividend and pension contribution would you recommend and how would you justify it?

Recommended

Britannic Money expands loan range

Flexible mortgage lender Britannic Money is expanding its product range following the launch of its IFA website www.britannicmoney.net. The new range includes a two-year capped rate from 5.55 per cent up to 75 per cent loan to value, and a two-year fixed rate from 5.35 per cent up to 75 per cent LTV. Britannic Money […]

Julian Gibbs

Despite criticism from some national newspapers, with-profits bonds are by far and away the best investment for most cautious investors, especially when interest rates are low. In times of volatile stockmarkets, the best with-profits bonds will continue to pay out bonuses above the rate of building society and bank deposits and, provided they are held […]

Paper-free zone

The vast majority of IFAs are willing and keen to start submitting new business application forms electronically. At last year&#39s excom, our series of regional roadshow conferences, we conducted a survey of over 200 IFAs to build up a picture of their use, or potential use, of technology. This survey, just before the launch of […]

Scottish Mutual marries tech and with-profits funds

Scottish Mutual has introduced with-profits.com, a unit-linked bond that allows investments to be split between a with-profits fund and a technology fund.The technology fund focuses mainly on technology stocks in North America and can include biotechnology, telecommunications and media stocks. The annual bonus rate for the with-profits fund is currently 5.25 per cent. Investors can […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com