Self Employed /Company Advice Please

It really depends on your financial circumstances and what you want to do with the business.

Having a Ltd company (generally) protects your personal assets by transferring liability to the company.

Profit can be retained in the company or paid out. There are rules as to the amount that can be paid out based on the company’s liabilities. If profits are paid out to an individual they are treated as income and liable for the usual deductions. There is nothimg to prevent you maximizing your pension contributions into a personal fund and using that to buy an investment property.

If you are growing/ want to grow your business you need cash in the co., it also improves perception of the business and makes it easier to get credit

Selling the company has tax implications -  selling the shares of the co. or selling its assets have different tax treatments.

You need to talk to an accountant.

Suspect it depends on your turnover and average annual taxable income after expenses etc. Also self employed here, sole trader like yourself. Signed up to a PRSA scheme about 15 years ago and now put in near max annually that's allowed. This reduces income tax payable. On retirement can take out 25% of fund I believe tax free and invest rest in fund that will pay additional monthly pension. Between that, two state pensions and some ongoing work (will you ever retire completely?) - expect to be reasonably OK. Some people invest in property and call it their pension but really it's a whole heap of extra work and expense too, and you're gambling on the property market.

You should be able to meet all the requirements for Retirement Relief and be exempt from Capital Gains Tax up to €750k when winding up the company - ie €750k you can withdraw tax free

You would probably be best to ask your accountant who files your company accounts and tax returns, they should be able to advise best

There are companies and individuals who go to various lengths & strategies to avoid paying tax and maximising the returns from their income streams. They employ accountants and legal people who specialise in tax to do this. They are not bog standard self employed people who read about these things. The PRSA type savings pension scheme was brought in to minimise charges and facilitate self employed to invest in own pensions. That's the simplest option with least work. I read there is a new pension scheme coming in with the government putting in €1 for every €3 saved, but best check that yourself :)

Not sure how people can give you advice. You say you take all profit from the company - is this 10k or 100k. How many. You are adverse to pensions, yet you want to save for retirement, and you also want to minimise tax. There are a few contradictions there. You can choose a pension with as much or as little risk as you want and it's tax efficient t

It's like me asking you to wire a house without giving you any dimensions, how many sockets etc. Excluding pensions out the gate is like saying I'm also not gonna consider a fuseboard

think about your first line there - if someone needed to fix a socket you might be able to give them advice on here. if someone needed to wire a house they would need to employ you to do the work.

in your case youre wiring a house, you need to talk to an accountant (sounds strange i know). the idea is that long term you will be saving many multiple of the initial cost of engaging them to help

John, lots of people here have advised you to talk to a professional but you seem hesitant. I understand your position. Talk to family/friends you respect and ask them who they use for financial advice. Talk to two/three of them and listen to what they say to you. The initial meeting should not cost you anything.

Doing it right, first time, could save you a lot of money in the future. But please do it!

Good luck to you!

Have you considered the close xonoany surcharge? You should talk to whoever does your taxes.

OP. You say that you’ve an issue giving your money to someone else to invest ? I bet there’s a few people here saying the same thing about electricians “ I hate paying them to re wire my home” 😉. I suggest (after 38 years in Financial Services) you pay a fee based broker for independent advice and avoid the “forum’s investment experts” 😎

Maybe it’s just a case of nobody here knows how to do it.

Google ‘set up Mortgage Pension’ and see if anything comes up.

WE HAVE NO INFORMATION ABOUT YOU so it is very hard to advise you

What age are you?

Is the figures you gave earlier of €35000 salary between yourself and wife accurate - hopefully you are not living on that alone!!

What other income do you have as a couple ( if any)?

Is the company profit figure you gave earlier accurate?

Do you have children? What is your future personal income needs

Your accountant does not set up a pension for you and hard to see how they are gaining on advising you to invest in a pension. You receive tax relief on the contribution so its a sensible option. Any financial adviser can you up with this - its nothing to do with your accountant. The accountant just claims the tax relief for you.

A company can buy a house but you will gain little personally on this structure.

When you liquidate the company you will pay tax on the withdrawal whether cash or property.

There are ways to limit the tax payable but we are talking complicated structures which being honest may be out your reach given that the company seems to be small.

John Electrician33 You are not making it easy on yourself.

So if you are an electrician what you are asking is the financial equivalent of the following:

. please give me a quote for this job.  I have a building that I need to rewire. The needs of the occupants change over time, so probably the next 30 years. The power loadings can be different, varying over time. There can be power supply problems which need to be curbed by surge protectors to prevent damage to some of the motorised equipment. Demand sometimes is for AC, sometimes needs to be DC. Location and type of power outlets varies, sometimes its single phase other times its different. Some plant might need special earthing and protective shielding from static build-up. Some appliances operate on 50 Hz, others at 60 Hz so they might need regulation.

Please give me a simple answer on this information.How much do I need to spend?

That is what you sound like, and it comes across as totally ...........

Sorry but that's a completely ridiculous response to the OPs original query.

OP - I hate to respond in a similar fashion to all before me, but you do need to talk to (or Listen to!) your accountant.

His advice to invest in a pension is the most tax efficient method to take funds out of the company and if setup correctly, with adequate funding, will provide for you in your retirement.

Of course there is a cost associated with managing this fund and you should shop around - ask what the 'fund allocation' is - this is the % of the money you hand over that actually gets invested, the rest is the pension companys fee. 95% allocation, means they are taking 5% straight away, so shop around.

Your idea of buying a house with company funds has 2 major issues for me

1. Buying a house, essentially means you are putting all your faith, not just in one asset class (property) but one individual property, while a pension, if setup correctly will be invested in multiple asset classes. This means the impact to you of any downturn in a certain sector of industry or one individual company are minimised as you are not over-exposed
2. You can't transfer a house from company ownership to personal ownership without paying tax, as far as I know. Presumably, you have put this idea to your accountant?

I did actually read the full thread. My advice is not made invalid by the fact that others before me have provided similar.

Your response, to which I referred, was in no way constructive and I fear was an ill-judged and pompous attempt to show off a somewhat limited knowledge of electrical theory to an OP who divulged that he is an electrician.

Oh, Happy Christmas 😉

Like much financial advice your is generic. When anyone comes on to sites in boards on categories like this whether it's business or legal the tendancy is to advice '' talk to a solicitor an accountant (financial advisor)''.

Often people/ posters need a LITTLE bit more explanation that bit of advice. Solicitors and Accountants often think everyone else is stupid. The reality is that while both are experts in there area neither have the reality of what happens outside there field.

There are some of us a bit outside there fields who have much more understanding of real life reality. Add to that that technical expertise brings a large degree of mathematical expertise ( accepting that the OP is not showing an exceptional level of the cross transfer of that at present).

However that is not to question the arrogance of some of the advice to seek professional advice so far.

John, I'm CIMA qualified accountant and did QFA exams, currently working in a property services company we employ 120 people. It's a different scale to you but principles are the same, just more complex. During my 5 years working in financial services company advising on pensions and investments I came across hundreds of people and don't take this the wrong way, but tradespeople were terrible at taking advice from professionals and would rather take it from colleagues in trades but some of what I heard was bonkers. They tend to ignore tax and only focus on after tax, take home income because that's what's talked about in the world of trades.

Owner of where I work now (family member) is retiring in 2023 and for the last 5 years we've been strategising his exit. But he's been financial planning his entire career. He has a mix of property, pensions in both his and his wife's name and other investments so he is well diversified. In the last few years I've realised I'm not able to be an investment advisor, tax advisor and retirement advisor as well as negotiating the sale of the company all by myself and either is the small accounting firm that have been our auditors for the last 30 years. We have employed a large professional services company for advice. Their fees sting a bit but best money we will ever spend. The amount I've learned this year is staggering. You just need the equivalent of our small accounting firm.

The reason you're getting so many responses saying talk to your accountant is because it's the best advice. You can do what you suggest by leaving money in the company and withdraw it under retirement relief (both you and your wife could potentially do this if its set up right so it can be more than the 700k you heard) but there's so many rules and regulations around these things you could get it so very wrong and get walloped in tax or even penalties. Age limits apply too.

Finance professionals are paid to understand these rules and advise you when and how to gain financially from your business. Don't think of them as salesmen, and if you do, find someone else that you trust is advising you well. Pensions are ways to get money out of the business tax free. You can combine a property with your pension. Again, rules around this.

One bit of free advice though is don't work your ass off just to buy a single property to rent out as that could go horrendously wrong. Non payment of rent, property price crashes, zero help evicting non paying tenants due to property crisis which may or may not be fixed in 20 years. All eggs in one basket is a very appropriate description here.

And if you still do want to do this, nobody can stop you but why not whip the money into an approved pension fund first, miminise your tax liabilities every year then use the tax free pension lump sum (which can be taken as young as 50 if circumstances allow) to purchase the property instead of out of already taxed funds?

You'd laugh at me if i tried to rewire my entire house myself and do your best to advise me to stop and get an electrician or I'll burn the place to the ground. Do it yourself if you want to but you'll miss out on so many tax breaks and planning efficiencies it'll be the financial equivalent of burning the house down. We only leave more profits in the company than we need to and pay tax on it because the company is up for sale and the accounts are where the value is derived from. But a 1 man electrical contractor is unlikely to sell his business and rather liquidate it like you said so whip that money out tax free, the government don't want to be worrying about providing for you in your old age so they've provided incentivised ways for you to do it yourself

Ok, I’ve deleted Dracula’s post and posts relating to it. No dodgy advice please people.

The Gloomster!

Your answer was given 2 posts above from buddy bubs

Whether you are building a house, wiring a house, getting a plasterer, or planning for your retirement- if you think hiring a professional is expensive, wait until you hire an amateur....

No if it is bought through the company you will have to pay full 50% VAT to government back not your 12.5% as the rules are different to company property rentals. You are also liable to tax of non rentals too.

Was always told rental housing property should be bought personally only land and commercial property to be bought by company and also depends on what the company is registered as could cause issues and an audit.

Smartest and best way to get money out of the company and tax free is into a pension, you may not want to do that but it is I’m afraid. End of a year, you have 50k left sitting in the business just transfer that into your pension and have it invested in numerous different funds and not pay any tax. So you put money into your pension, get a lump sum payment on your retirement date (could retire at what ever age you decide), then get a monthly payment on what is set out in your requirements (say you have been told €4,000 a month would be doable)

That response would be funny were your attitude not so sad for your family. People here know (and several have said) whi is talking garbage. Perhaps you don’t like that I was the first who actually gave you some hard advice/figures and punctured your ravings.

FWIW at your age my pension was nearly fully funded for retirement at age 55. I had a holiday home with no mortgage and a main residence that had a small mortgage because it was tax efficient. But most of that  was because I sought the best professional advice early in my career and followed it. (I didn’t bother to stop at 55, I kept going because I love what I’m doing.)