Self Employed - starting a pension.

P

PDCAT

Guest
My Partner is in her first year of running her Small Business. She is operating as a sole trader. At the moment she is making ends meet.
She is taking out 300 euro's a week as Drawings and i believe she will have to pay tax on this at 20% at end of year.
Should she start a pension and get some Tax Relief on what she will have to pay.
My calculations are probably wrong but:

300 X 52 = 15,600 Euros per annum

15,600 X 20% = 3,120 Tax Payable.

By starting a pension how much/if any could she save in this instance. Again if my figures are wrong please tell me.

Thnks

PDCAT
 
Hi PDCAT

1) She will pay tax on her profits, not on her drawings. So if she makes €30,000 a year, but only draws out €15,000, she will pay tax on €30,000.

2) She should not start a pension until she is paying tax at 42%. At 20%, she gets tax relief at 25% (including prsi). When she takes it out as pension, she could pay tax on the pension at over 30%. There is no point in saving at 25% to pay at 30%. And she has to put the money away until she retires. She may need it in the meantime.

Brendan
 
Self Employed - Starting A Pension

Thnks for the reply Brendan.

Just wondering, are u saying she should not take out a pension. Thought it would be in her interest to provide for future.
Business will have approx 10k profit at end of this year, so i assume she will pay tax on this at 20%.

I had thought if she took out a pension she could reduce this tax payment.

Rgds

Paul.
 
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