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  • Tax

    Pension strategy for Self Employed & S24



    I would like to share with you a strategy I am using  to help with the Tax issues now raised in the PRS

    This strategy may help Landlords who are Self Employed or have Employed earnings

    I used to save money for deposits to buy BTL property in my own name but with S24 I found it was not tax efficient to put more money

    into BTL Investments I am a 40% Tax payer  and aged 59 so I set about thinking what I could do with the funds

    For my this illustration I will use a 8% growth rate for pension performance

    The Goals for this plan are

    1 Tax Free Income

    2 Ring fencing funds from IHT

    3 Rainy day funds for an emergency encase  I need Income away from BTL

    Step 1 I fund my pension over a Twelve month period with Gross £25000

    Step 2 I claim 40% Tax Relief on the £25000 so net I will pay £15000

    Step 3 I take my Tax free Lump sum 25% £6250 and spend it as I will

    Step 4 Leave the rest of the fund invested in Managed Funds £18750

    Now this is where I find greatest interest as an investor

    If I project the Pension fund forward at a growth of 8% the figs in my opinion are good

    after 5 years £27900

    after 10 years £41600

    after 15 years £62000

    after 20 years £92300

    so for an investment £8750 I have made a return in 20 years of around £92000

    I can repeated this strategy over the next 15 years which will make a lot of money totally tax free

    There are also benefits in regard to IHT and the Pension fund can be passed down to future generations

    You could also use this strategy as a Director or if you are in an employed position

    as in all my illustrations this is just Fag Packet stuff and I would recommend you take professional advice on this topic

    I believe this is a very good way in tackling S24 if you are over 55 and you are using it as part of IHT and s24 tax planning You can pay up to 40k a  year into pensions

    a point to note is if you touch the fund over the 25% Tax Free amount you will only be allowed to pay 4k a year so be careful and take advice

    Regards DL

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    Learn Change and Adapt ?????

    1. so for an investment £8750 I have made a return in 20 years of around £92000.

    Edit Missing 1?  Was this £18750 or have you draw down £10k.

    At 59 so will be 79 when you enjoy approx 92k extra. Smile


    confused about pensions and im too cheap to get financial advice.

    Question if you don't mind answering.

    I was last self employed 2016 tax year, approx 25k net BRT,

    How much if any can I put in pension SIPP after April 6th 2018.?

    Can I claim for years before 2015,2014,2013 and  limited to 2012? ( 6 years)

    Or should I be opening up sipp before end of this tax year.


    Decision between saving for a future which I don't see or paying down BTL mortgages now.

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      BTL - Vacant £450 PCM | Only £57951  in PT Marketplace.

    Not having a Plan. If you Fail to Plan, You're Planning to Fail.

    wisdom involves an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.


    You can put 100% of  your self employed earnings into a SIPP up  to a max of 40k per year

    You can also go back a number of years too

    If your goal is to pay down mortgages I would not use a pension as this will only give you 25% of your fund

    I save extra money into my ISA so I have funds if needed  to pay down debts later if I want too

    There is a good book out called pension Magic which gives lots of tips for pensions

    But if you need advice I would consult a good IFA who will not charge you for advice at a first meeting





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    Learn Change and Adapt ?????

    Thanks to DL I have been looking into Pensions too and will be starting mine this year. I'm also 59.

    The £8750 was the correct net cost not £18,750.  This is due to £25k being the gross invested but the net cost is only £15k after tax relief.  DL then draws the 25% allowable tax free amount which leaves her net cost at £8750 and will leave £18,750 in the fund to accue interest.

    You can only backdate up to 3 years and you must have been a member of the fund during this time.  So if, like me, you had no previous pension then you can not claim back the previous 3 years.  Definitely open your SIPP before the end of this financial year even if you can't put much into it as you will then be able to top up from the unused amount over the next 3 years.

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    Paul I am glad you got the post ok

    It can be difficult at times explaining this But once you grasp it its quite powerful

    I have worked out over 20 years if I live that long I could ring fence over one million pounds with this strategy

    The cost to me is really quite low its a great hedge against all taxes which is quite nice for a change

    There is another angel to this as you see the pension fund grow you could take the pension after 75 for the rest of my life

    and allow me to give assets ie my unencumbered BTL to my Son or Grandchildren

    as I wont need the BTL income because I have replaced it with pension income

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    Learn Change and Adapt ?????


    So I can put in 25k into a new sipp now before April 5th.??

    Thanks for replies.


    Would like to have control and thinking of putting that into new sipp and adding some extra.

    Only three years back ?? I thought it was six. No employment last 2 years only 12k property income.

    Left too late to get ifa advice.? 4 days till good Friday.

    I had a Prudential workplace pension 2002 roughly 2.5k in there which I have not contributed too since. I'm not sure if the pension person did something dodgy when set up. I got 5 different pots?? I have trust issues with IFA. ( No offence DL) 

    50k cash

    My choice was between overpay lump-sum now to pay down BTL mortgages or put into pension because of 20% factor.

    Pay down today or let it ride and pay down later. Devlerage Vs pension growth.

    I totally understand why higher rate tax payer should do it. But only every been lower rate tax payer has went part time for last 7 years.

    Variable 5% - so effectivly 5% gain although not compounded return, but rents should rise to compensate and have unencumbered property.

    Dilemma. Paying off debt Vs pension investing.

    One is  gauranteed at return of at least 5% ( more if IR rise) saving of interest,  the other 8% potential growth is not guaranteed.

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      BTL - Vacant £450 PCM | Only £57951  in PT Marketplace.

    Not having a Plan. If you Fail to Plan, You're Planning to Fail.

    wisdom involves an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.


    If I was a lower rate tax payer I would pay down debt first


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    Learn Change and Adapt ?????


    I thought one cannot take cash out of a new pension until after 5 yrs?

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    You can take money out of a  pension after 55


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    Learn Change and Adapt ?????

    Note that income from letting does not count for pension purposes, nor do dividends.

    I am a basic rate taxpayer with no qualifying income so the maximum I could contribute to a pension is £3,600 gross, £2,880 net. I could pay  in £2,880 which would become £3,600. As I am over 55 I could then take out £900 tax free and the rest paying 20% tax for a net  £3,060 (minus any transaction fees) making £180. However that would trigger MPAA and limit me to contributing £4k pa in future. It is possible I will want to contribute more than that from my company at some time so I am not doing it.

    DL's plans do not trigger MPAA as she only withdraws the tax free amount.  If I did that I would be locking up a significant part of the income I need to live on.

    I have a plan for paying off the mortgages in my own name next year which involves selling my former home and using the tax free lump sum from one of my pensions. so I am not paying down debts this year.

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    If you have a company peter your company can make payments to you sipp

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    Learn Change and Adapt ?????