Serving the Teesside Business Community | 55
Robert Little of Bob Little & Co has
offered important advice to owner
directors of limited companies.
LITTLE TIPS TO MAKE A
BIG DIFFERENCE
M
aking a success of your business
is hard work – so the last thing
you want to do is hand more of
the profits over to the taxman
than you need to.
Yet that’s exactly what might happen if
you don’t take some relatively simple steps
to avoid it, says award-winning independent
financial adviser Robert Little.
If you’re an owner-director who works in
a limited company and have built up a cash
surplus in the business, you should think
carefully before deciding what to do with it.
Options include keeping the money
in the business for future expansion or
paying yourself a dividend. But the latter
has become less attractive since changes
introduced last year.
Any dividends above £5,000 are now taxed
at 7.5% and at 32.5% for the higher rate
bands. Next year the allowance reduces even
further.
But Robert, director of Redcar’s Bob Little
& Co, says a third option, paying money into
your pension pot, can bring considerable tax
benefits.
“Most people aren’t aware of this before
they come to see us,” says Robert, whose
company was recently named North East
Adviser Firm of the Year.
“You may be able to make a contribution to
your pension that’s not subject to corporation
By Mike McGeary
tax, providing it meets HMRC’s ‘wholly and
exclusively’ test and the payment is only
made for legitimate trade purposes.
“This option is not open to everyone. For
example, if your husband or wife works part-
time for the business, any payment into their
pension must be commensurate with the
work they do, to qualify for tax relief.
“But if you are eligible, as well as the
straightforward taxation benefits, you’re
building up your own personal assets outside
the business. You don’t normally have to
declare it on your tax return or pay any tax or
National Insurance on the contribution.
“And there’s another benefit that’s often
overlooked, related to something called
Business Property Relief. The value of shares
in a limited company engaged in most trades
is normally excluded from the value of an
estate for Inheritance Tax purposes.
“However, if the business holds too much
cash this excess can be included in the value
of an estate. At the 40% rate of Inheritance
Tax, that’s going to bring a substantial bill
– and possibly cash-flow problems for the
business and its owners.
“If you paid that money out as a dividend
and it was in your bank account or ISA or
paid off your mortgage, that all increases the
estate’s value. But paying it into a personal
pension normally doesn’t.”
“There are various limits to how much you
can pay into a pension so it is important to
seek advice about this topic.”
Bob Little & Co, the firm started by
Robert’s late father, Bob, back in 1985,
has enjoyed a highly eventful period since
becoming one of only a handful of North East
firms to be awarded Chartered status by the
Chartered Insurance Institute in 2014.
Last year Robert was a finalist in the
Personal Finance Society’s Investment
Advice Specialist category and then in
February the firm won the regional title at the
Professional Adviser Awards in London.
But ambitious Robert, who has a First
Class Financial Economics degree and, at 28,
is one of the country’s youngest chartered
financial planners, has no intention of resting
on his laurels. He is currently preparing
for another exam which focuses purely on
investments.
“Very few financial advisors have this
qualification, but my job involves assessing
different investment options for clients, so
it’s given me a lot more insight into how
investment managers make their decisions,”
he says.
The firm, which has four advisers and
seven support staff, is based at Kirkleatham
Business Park and offers advice on areas
including savings and investments,
retirement planning, mortgages and tax
planning.