Build your CPD with technical expertise from our CII accredited MasterClasses.

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Watch the latest CII accredited MasterClass from our Financial Planning and TechTalk team and add to your CPD learning. In this recorded MasterClass from 28 January we share our technical guidance focusing on Self-employed pension planning.

By the end of this masterclass you will be able to explain;

  • Relevant UK earnings and the annual allowances,
  • The different types of business structures and the pension options available to each,
  • How different accounting periods interact with pension planning.
  • Company: Lloyds Banking Group

    Conference Title: Techtalk Masterclass

    Date: Tuesday, 28th January 2020

    Conference Time: 10:30 (UTC+00:00)


    Operator: Good day and welcome to the Self‑Employed Pension Planning Call.  Today's conference is being recorded.  At this time, I'd like to turn the conference over to Gareth Davies.  Please go ahead.

    Gareth Davies:  Thank you very much and good morning everybody.  As was said there, my name is Gareth Davies, Pension Specialist for Scottish Widows.  Welcome to the Scottish Widows CII‑accredited Techtalk Masterclass on Self‑Employed Pension Planning.  Today I'm joined by Bernadette Lewis and Tom Coughlan from the Financial Planning team, who will shortly be taking us through the presentation.  At the conclusion of the presentation, you'll hear where you can find and access further information covered in today's slides. 

    We have a range of detailed technical content on all aspects of pensions, tax and legislation, through our CII‑accredited CPD guides, Techtalk articles and a number of tools and calculators which can be accessed via the Scottish Widows advisor extranet site.  Today's presentation is scheduled to last for about 45 minutes, which includes time to answer any of the questions that you've raised throughout. 

    Full details of how you can ask questions will be given out at the end but you can ask online as we go along.  The presentation will also be recorded and available for subsequent review via the Scottish Widows advisor extranet website and CPD certificates will also be issued for those who are attending live.

     I'd now like to hand the call over to Bernadette to continue.  Over to you, Bernadette.

    Bernadette Lewis: Thank you very much, Gareth.  Okay, so I'll just give you a quick overview of what we'll be covering today.  When we're talking about the self‑employed category, we're including the traditional unincorporated businesses, such as sole traders and partners who are taxed on a self‑employed basis and then, depending on your definition, it's also come to include one‑person companies, who are obviously taxed as employees.

    Despite the diversity of legal structures involved here, this group is all linked by the fact that they ultimately end up funding their own retirement savings.  We will be looking at the tax aspects of pensions for each of them in turn.  I'll start off with a quick overview comparing self‑employed and limited companies, then drill down into sole traders and partners to start with, looking at their pension planning issues, particularly looking at the interaction between pension contributions, accounting dates and self assessments. 

    Then I'll be handing over to Thomas Coughlan, to take you through one‑person limited companies, where again we'll be looking in that case, particularly, at employer contributions and their role in the overall remuneration mix.  Under other issues, we'll be taking a quick look at some aspects of automatic enrolment and where we might go with the self‑employed group.  Then, at the end, we'll be taking you through some of your questions and if you can submit those online during the course of the session, we will pick them up at the end, based on what you have submitted.

     So, going through the objectives of this session, by the end of this masterclass, you'll be able to explain relevant UK earnings and the annual allowance, the different types of business structures and the pension options available to each of those business structures and how different accounting periods interact with pension planning.

    Going through a quick overview, the self‑employed group is approximately 4.8 million people in the UK but according to IPSE, only about 31% of them are actually saving into a pension.  And even those that are, they're not going to have an employer choosing their pension scheme and investment funds, or adding their own contributions, so they're at quite a disadvantage compared with our employed population.

    Despite these disadvantages, there are significant tax benefits available to self‑employed people saving in pensions.  So if we look at what's important, given the fact that these people are very reliant on themselves, they really do need to be making sure that they are building up an adequate state pension.  They can check their position via the Gov UK website.  There is a 'check your state pension' option there. 

    For self‑employed people, they need to be making sure they are actually paying their Class 2 contributions and even if they've got very low profits, they can pay those on a voluntary basis at a very low rate.  For people who are working through their own limited companies, they want to be making sure that they are paying themselves a salary somewhere between the lower earnings limit and the primary threshold for national insurance, so that they build up national insurance credits, even if they're not actually paying national insurance contributions.

    There are no overall special pension rules for self‑employed people.  We're still talking about tax relief being available on their own contributions up to 100% of their relevant UK earnings, or for those people with extremely low relevant UK earnings, they can contribute, like everybody else, up to £3,600 gross a tax year.  They use self‑assessment in the same was as everybody else to claim any higher or additional rate of tax relief on their contributions.

    The annual allowances all apply in the same way, so for most people that will be the standard £40,000.  Higher earners can be affected by the £10,000 minimum, if it applies, tapered annual allowance and people who've accessed their pension fund could be caught by the money purchase annual allowance. 

    Most people will be paying their contributions under the relief at source method, where they get basic rate tax relief added by the pension provider.  Despite there being no specific pension rules for self‑employed people, there are some differences compared with your standard employee.  So, for sole traders and partners, they can benefit from personal contributions and it's also possible for them to have third‑party contributions, although those will be relatively unusual. But there's no option for employer contributions because they simply don't have an employer. 

    For self‑employed people taxed on a self‑employed basis, when we're talking about 100% of relevant UK earnings, we're referring to their net trading profits for an accounting period - and we'll explain that shortly.  Because they're not employees and don't receive a salary, there's no salary sacrifice option and they're outside of the scope of automatic enrolment. 

    For one‑person limited companies, they can also benefit from personal and third‑party contributions.  They can also benefit from employer contributions and there are some planning opportunities but ultimately, they are going to be funded by the owner of the business, so they're still, effectively, funding themselves. 

    They can make personal contributions up to 100% of their earnings, which will be based on the salary they are paying themselves. They can switch between personal and employer contributions relatively easily; you don't need to go through a formal salary sacrifice process.  And for most people in this category, they will be outside the scope of automatic enrolment, either automatically excluded, or optionally excluded.  Most people in these categories will be funding their pensions via contract‑based plans, personal pensions, stakeholders, SIPPs, but some of them might opt to use NEST, which is open to them.

    And focusing in now for the next bit, on sole traders and partners, those people who are taxed on a self‑employed basis.  For these people, one of the things that we have to bear in mind is their accounting date.  This is the date that the business makes up its annual accounts to.  That could be 31st December, 5th April, 30th April.  The business chooses their accounting date; it is very much a business decision but it does have a knock‑on effect on their pension planning.

    So, as we know, the tax year runs from 6th April 2019 to 5th April 2020 or as appropriately for each year.  It's possible to have an accounting year end which will completely align to the tax year, so you could have a 5th April tax year end. It is the end date of the accounting period which determines the tax year into which it falls.  So, a 31st March year end will reasonably closely align to the tax year. 

    A 30th April year end will be way out, so the year end of 30th April 2019 is treated as falling into the tax year ending in 2019–2020.  And a 31st December year end would mean that a 31st December 2019 accounting year end still falls into the 2019–2020 tax year, so there's a wide range of options that could be chosen.

    If somebody uses a 5th April accounting year end, in a lot of ways that's the simplest option.  They will know that the profits earned in that accounting period exactly aligned to the tax year, so their profits will be assessed in the same period that the profits are earned.  However, when it comes to pension planning, there can be a disadvantage because, until the accountant has actually made up the accounts, that person won't know their accurate relevant UK earnings, so they will be relying on an estimate when it comes to making pension contributions.

    31st December is another popular option because it ties in with the calendar year.  However, that means that you are out of sync with the tax year by around three months.  But it does give your accountant a bit of time to finalise your accounts and to give you an accurate calculation for your relevant UK earnings before the tax year ends, if you want to make a pension contribution in the tax year.

    And some people will use, say, a 30th April accounting year end, which is then completely out of sync with the tax year.  But it does give the accountant a full 11 months to work out your relevant UK earnings, your trading profits, before the tax year ends, if making pension contributions is an issue.

    We do have to say that you're not going to choose your accounting date purely on the basis of whether you want to make pension contributions or not.  The accounting date should fit the business's own needs.  When people do have an accounting period which is towards the end of the tax year, particularly the 5th April end date for accounting periods, if they are relying on an estimate of their trading profits and therefore their relevant UK earnings, it is possible that they will get that wrong. 

    If it then turns out that they have overcontributed to their pension, if they've gone into a relief at source scheme, generally speaking that provider can't accept non‑tax‑relieved contributions and might have to do a refund of the net contribution. And pay the tax relief back to HMRC, in respect of the bit which exceeds what it turns out their relevant UK earnings actually were.

    We'll start now drilling down into an example.  So, we'll look at somebody who has got a 30th April 2019 year‑end, so we know that the profits earned in the tax year 6th April 2019–5th April 2020 will be £64,000.  They've had a significant amount of time for their accountant to work that out, so we're now comfortable that that's going to be their profits.

    If they want to make personal contributions in 2019–2020, they know that their relevant UK earnings are £64,000, so that sets the maximum personal and third‑party contributions they can make and get tax relief.  That will also be £64,000.  However, they do have to take account of the annual allowance, so if they are subject to the standard £40,000 annual allowance, they will need to make sure that they've got enough carry‑forward, a further £24,000 of carry‑forward, from the three previous tax years to avoid an annual allowance charge. 

    Now, someone, if they really want to, can pay over their available annual allowance; more usually people do this by accident.  But if they do end up with an annual allowance tax charge, self‑employed people deal with it in the same way as everybody else.  They declare it on the additional information section of their self‑assessment form and pay their charge via self‑assessment.  Although in some cases they might be able to arrange for scheme pays if they qualify for mandatory scheme pays, or if their particular provider offers voluntary scheme pays.

    When it comes to paying their tax, I mentioned self‑assessment, trading profits for the tax year ending 5 April 2020 will finally be assessed by 31st April 2021, that will be their self‑assessment deadline.  However, they will be making payments on account well before then.  So, for people who pay tax on a self‑employed basis, there is a first payment on account on 31st January during the tax year, so for the 2019–2020 tax year; that would be 31st January 2020. 

    Their second payment on account is just after the end of the tax year, so in this case that would be on 31st July 2020 and then the balancing payment is worked out when they actually complete their self‑assessment tax return.  So, for 2019–2020, that will be by the deadline of 31st January 2021 and at that point, in most cases, they will be paying some extra tax as their balancing payment.  If it turns out that their payments on account had overpaid the tax that was due, they would be entitled to a refund.

    So, if we go through our particular example, where this person has £64,000 of trading profits for 2019–2020, their eventual tax bill is going to be £13,100.  That's based on their personal allowance of £12,500 being taxed at 0% and paying £7,500 at 20% on the basic rate band of £37,500 and then, finally, £5,600 at 40% of their remaining £14,000 of profits.  And of course, they will also be paying their national insurance contributions, which in this case will be just over £4,000.

    In terms of actually paying that tax bill, we have to go back to the previous tax year to work out what their payments on account should be.  So, if the 2018–2019 income tax liability was £12,000, their first payment on account and their second payment on account will each be half of that, £6,000 each.  So as their tax bill is £13,100, their balancing payment is £1,100 and that will be due on 31st January 2021.

    Let's now look at what happens if they actually make a pension contribution.  This person decides to make a pension contribution of £5,500 gross, so they actually pay to their provider £4,400 net, after benefiting from their basic rate tax relief at source.  Because they are in the higher rate tax band, they can claim a further £1,100 of tax relief via self‑assessment. 

    That has the effect of eliminating the balancing payment for 2019–2020 because they've just reduced their tax bill from £13,100 back down to £12,000.  It also has the further cash flow advantage that the payments on account towards 2020–2021 will now reduce from £6,550 each to £6,000 each.

    Of course, the primary driver of making that contribution is going to be this individual's expected retirement needs and their available funds to make the contribution, but it's worth knowing that, for self‑employed people, there are also further cash flow planning advantages in many cases.

    And now I'm going to hand you over to Thomas to take you through one‑person companies.

    Thomas Coughlan: Thank you Bernadette.  Good morning everyone.  Yes, so, moving on to one‑person companies.  So, the key difference here in terms of pension planning is really the availability of the employer pension contribution and all the other differences really stem from that single difference

    So, generally, they will be paying to stakeholders, personal pensions and SIPPs, potentially NEST in some cases as well.

    So, the first question really is whether a personal contribution, or an employer contribution, is better. 

    So, just to summarise some of the key aspects of personal contributions first, so, someone who runs their own companies must have earnings to be able to justify tax relief on a personal contribution, so that will generally mean they have to pay themselves some salary and people in this situation often pay themselves very low amounts of salary, so whatever personal contribution they pay, they will have to make sure that they pay themselves enough salary to get tax relief on that contribution. 

    That's just simply a matter of increasing their salary, if they have to.

    Now, the annual allowance applies in the usual way: the annual allowance plus carry forward, etcetera and the annual allowance charge as well.  So, generally speaking, personal contributions aren't that popular in this situation because the employer contribution is more tax efficient.  However, for those with very low incomes, so income below the personal allowance, if they pay a personal contribution despite not paying any income tax, they will get tax relief on their contribution.  So, paying a personal contribution, in that instance, is often better than the employer contribution.

    In terms of employer contributions, then, so earnings aren't required to justify tax relief on an employer contribution.  In terms of getting tax relief, it will be corporation tax relief and that just has to satisfy the usual wholly‑and‑exclusively test and an employee contribution paid by a one‑person company almost always qualifies for that because there will very rarely be a non‑trade purpose for any aspect of their remuneration package.  And as I alluded to, employer contributions are usually more tax‑efficient than an equivalent personal contribution.  That is due to the national insurance saving.

    So, that's the general position but a much more meaningful analysis would be to do a tax comparison between someone paying themselves a salary and then paying a personal contribution or paying an employer contribution first. 

    And in terms of the employer contribution, again, as I said, it would be the national insurance saving that will – that often makes them more tax efficient and all of the employer national insurance saving is available, not just a part of it that might be available through salary sacrifice because it's a real cost that the company incurs and that saving will be available in full if they switch from a personal contribution to an employer contribution.

    So, this table just shows simple scenarios, so someone with profit of £100,000, they pay that salary to themselves and then they use those funds to pay a £20,000 gross contribution to their personal pension, so that's the middle column.  And then the right‑hand column is then switching that, so paying an employer contribution of £20,000 and then paying the rest via the salary route.

     So, the profit to be distributed is £100,000.  However, that will be a deduction for corporation tax purposes, so there wouldn't be any taxable profit after that.

    The employer national insurance contribution is very important.  As I said, that's a real cost the company incurs and it's often missed when doing a comparison along these lines.  So, if you were going to distribute £100,000 out of your company via the salary route, you would end up with an employer NIC liability of £11,079, so the actual salary you get is reduced down to £88,920.  That's your real salary figure that, then, tax is calculated on. 

    So, the income tax and employee national insurance amounts to £28,810 and then, from that, you would then deduct – from what's left, you would then deduct your net contribution to the personal pension, which in this case is £16,000.  And being a higher‑rate taxpayer, they would then get higher rate relief back by their self‑assessment of £4,000.  So, their take‑home pay then amounts to £48,109 but, of course, don't forget that £20,000 has gone into their pension as well.

    The right‑hand column, so that shows the employer contribution of £20,000 and the remaining £80,000 then distributed by the salary route.  So, the employer NICs are lower, at £8,654, because of the lower amount of salary and the income tax and national insurance on the actual salary are lower as well.  So, the end result amounts to £49,916.  And so, in both instances, £20,000 has gone into the pension but using the salary and employer contribution route, you've improved ultimate take‑home pay by around about £1,800.

    That will usually be the scenario where profit, or income is high.  If income is lower, nearer to the personal allowance, then that scenario might change.  So, in each situation you'd need to do a rough tax comparison, just to see what potential improvement is available on the employer contribution route.  But, as I say, for most scenarios, the employer contribution will be preferable.

    Okay, so that's the first question.  A more familiar comparison will be between salary, dividend and employer pension contributions.  So, just to summarise some of the key aspects of each of those, so, as I've mentioned already, so you've got to consider the employer national insurance contributions when paying yourself salary through a limited company.  Beyond that, salary is taxed in the usual way.  At least some salary should be paid to ensure you get state pension credits, so you should at least be paying yourself up to the national insurance threshold, which is £8,632 at the moment.

    Dividends: whilst you can pay yourself unlimited amounts of salary, if you only pay yourself dividends through a company then that can be scrutinised by HMRC, so that would require the business owner to have a discussion with their accountant around that.

    In terms of the taxation, then the first £2,000 of dividends are tax‑free.  After that, those that fall in the base rate band of tax at 7.5%, those in the higher‑rate band - 32.5%, and those that fall in the additional rate band are taxed at 38.1%.  So, the tax rates are lower but dividends are paid out of post‑tax profits, which means 19% corporation tax would have been deducted from those profits first, so that has to be taken into account. But dividends, generally, are more tax efficient than salary. 

    However, as I said, they are subject to scrutiny by HMRC, so you can't always just pay yourself a dividend.

    Employer contributions are perhaps the most tax efficient of those three.  They're not limited by salary and as I've mentioned before, the wholly‑and‑exclusively test is usually met in each case.  So, going down that list, from salary, dividends to employer pension contributions, they tend to become more tax efficient.  So, salary is the least tax efficient; employer contributions are perhaps the most tax efficient but as you also go down the list, they become more restrictive as well. 

    So, you can pay yourself unlimited amounts of salary but employer contributions are limited, effectively, by the annual allowance, which may well be £40,000 but it could be as low as £10,000.  Or, if you've triggered the money purchase annual allowance, it could be as low as £4,000.  But it's worth doing a comparison between those three and various mixes of those different components to see which is the most tax‑efficient remuneration strategy for that particular individual. 

    And as I've said, employer pension contributions will tend to be the most tax‑efficient but also, not only that, you also get the advantage of building up some retirement funds as well.

    So, Scottish Widows have a salary dividend and an employer pension contribution calculator.  That's on our advisor extranet under pension tools and if you click on that, then that will bring you to the input screen shown on the slide there.  It's very much a trial‑and‑error system, so you would input the amounts you want into each of those three boxes and you can change and amend those as you like, so it's very much a  freeform tool which just allows you to input the appropriate mix of each of those components of remuneration.

    If you are going to input an employer pension contribution, then it's important to just complete the additional pension inputs on the right‑hand side, so they then specify the assumptions to be used for your pension contribution, so, for example, what your tax rate in retirement will be, how much annual allowance, plus carry‑forward, there will be, which allows it to then incorporate the annual allowance charge, should there be one, just to make sure there is a fair comparison between the three different components.

    So, if you input some figures in there and then hit 'calculate', then it will bring up the results screen, which looks something like that.  So, just going through those three columns, so the example that I've used there is the same as the example on an earlier slide, so £80,000 paid via the salary route and £20,000 paid via the employer pension route. 

    So the figures on the left‑hand side, the £80,000 salary, are familiar, so £49,916 is the net benefit to the individual there and the important figure below that, the extraction rate, is what that represents as a percentage of the overall cost to the company of £80,000. 

    In this case, it's 62.4%.  The employer contribution on the right‑hand side, so there is – there's no annual allowance charge but there is a potential tax on the pension contribution in retirement and the calculation just includes a provision for that future tax, so it just makes sure that all taxes are incorporated.  So, in this case, I've assumed basic rate retirement on three quarters of it.  So, to take out the tax‑free cash, that amounts to £3,000. 

    So, the extraction rate for the pension component is 85%, so it's significantly higher than the salary.  And the important column is on the right‑hand side, the combined extraction as a total, so the £100,000.  When you consider all the different components together, what you are extracting out of the company using that particular strategy is 66.92%.  And as I said, the tool allows you just to go in and to amend and update your figures and just change and just play around with different scenarios. 

    So, for example, if you were going to change that from £80,000 and £20,000 pension contribution to £60,000 salary by increasing the pension contribution to £40,000,  the results will be updated to reflect that.  So, the salary is lower, so the amount of net benefit is lower but the overall extraction rate.  So, it was 62%; it's now around 66% and that's basically because a higher proportion of the salary now falls within the personal allowance.

    For the pension, it's within the annual allowance, there's no annual allowance charge.  The extraction rate is the same, even though it's a higher amount; there's still an assumption of basic rate tax in retirement but the combined extraction rate is important, on the right‑hand side and that's gone up from 66%, I think it was, on the previous slide, to 73% and that's just owing to the fact that a great proportion of the money taken from the company is taken via the – by the more tax‑efficient route of the pension scheme.

    And as I say, the tool can allow you to just specify different scenarios just to work out what is the best way of drawing funds from the company, in that case and it's that trade‑off between putting money into a pension to build up retirement funds but also those funds not being immediately accessible, or not being accessible until age 55 but it can give you an idea of the tax consequences of perhaps just moving, perhaps,

    some salary or some dividend across the employer pension route and seeing how that affects the overall amount that can be drawn from a company.

    Okay, so that's the two main business structures for the self‑employed.  Just moving on to automatic enrolment, not a huge amount to say here.  So, the automatic enrolment rules don't cover the self‑employed, so not having an employer, not being a worker, means that you won't get the minimum contributions.  However, being self‑employed doesn't necessarily mean that you don't have any automatic enrolment obligations yourself.  So, you might be self‑employed but also have people working for you that you potentially have to assess and enrol into a scheme. So that's unincorporated businesses. 

    Sole directors and employees of a company, so when there's just one person involved in a company, they're excluded from automatic enrolment.  If there's more than one person involved in the company then it's not quite as clear cut as that and you'd have to look at the rules and to see whether that individual has any automatic enrolment duties or is covered by the automatic enrolment rules themselves.  Assuming they're not covered, then they're outside of the scope of that and TPR have considered introducing automatic enrolment for the self‑employed but no clear approach has emerged yet. 

    There are some alternatives that have been mentioned, so for example a behavioural nudge by the self‑assessment system, or contributions collected via the national insurance system or potentially repurposing LISA for the self‑employed but none of these have caught the imagination particularly.  So, for the foreseeable future, the self‑employed remain fully responsible for their own retirement savings, so they have to therefore make use of the opportunities that do arrive.

    So, unincorporated businesses, they should make full use of their earnings in the tax year that do arise.  You cannot carry forward your earnings, you can only carry forward the annual allowance.  If you missed the opportunity to utilise your earnings in a tax year then the year after that, you won't be able to use those earnings again and you're potentially limited to £3,600.  So in a year where there are no earnings, or there's a loss, then you should utilise that £3,600 de minimis limit. 

    You can potentially use that for the spouse, so if you haven't got any earnings at all, then you've potentially got scope for £7,200‑worth of contributions and of course unincorporated businesses can always consider incorporation but, as Bernadette pointed out, that shouldn't be the key driver and advice should be taken as to whether that is the best thing for the business.

    Company owners, going back to my previous example, should make personal contributions from salary if their profits are very low, so below the personal allowance.  Otherwise, they'll generally be considering employer contributions and that should be considered as part of their overall remuneration strategy to maximise the tax benefits of drawing money from their company and building up their retirement funds.

    Okay, so that's the technical content.  I'll just briefly go through some of the resources we have available.  So, our latest edition of Techtalk is currently on the website.  The January edition has got a range of articles.  It's got a lot of pension planning articles, given the proximity to the end of the tax year, so we've got an article looking at third‑party contributions.  We've also got an FAQ article looking at internationally‑mobile members. 

    We've got two self‑employed pensions articles, so 'Bridging the Retirement Savings Gap for the Self‑Employed' and then 'Timing is Everything: Self‑Employed and Saving for Retirement', which goes into a lot of the stuff around unincorporated businesses and balancing payments and payments on account and the potential cash flow advantages of paying contributions to reduce your future – the following year's - payments on account.

    We've got an article about financial resilience, protection and inheritance tax, potentially exempt transfers and looking at how to take tax‑free cash beyond age 75 and the tax aspects of that.  And Gareth has a DB advice article looking at the Consultation Paper 19/25 from the FCA.

    We also have a range of tools, so, very important at this time of year, the carry‑forward calculator.  That includes a tapered annual allowance tool which allows you to calculate the effect of the taper for each tax year and then import that back into the carry‑forward tool. 

    As I've already discussed, we've got the salary, dividend and pension calculator and we've also got the salary exchange tool as well.  And we've also got a range of accredited CII, CPD guides, a whole range of stuff covering all the major pension topics, varying in size from very comprehensive guides that will take an hour or so to work through to more, shorter, bite‑sized stuff that you should be able to work through in 15 minutes. 

    And they cover not only pension, we've got protection guides as well.  And then we have all our archive of Techtalk articles and other articles that we've produced over the years.  And to help you find those more easily, we've got the Techtalk index, which should help you to find all the articles we have on a given pension topic.

    And if you're interested in going back over our masterclass library as well, we've got all the recordings of all the masterclasses that we've run over the last couple of years, covering a huge range of topics.  There's just six there on the screen but we've got about a dozen or so, going back over the last couple of years, for you to look at.

    Okay then, so I want to go through some of the questions that have been submitted.  We've got quite a lot of questions, so we won't be able to get through them all but we'll have a look through some of those questions.  So, a question for Bernadette, so can an employer pay all of their employee salary as a pension contribution?

    Bernadette Lewis: Yes, they could.  Their salary will count as 100% relevant UK earnings, so they could pay that gross amount in as a pension contribution, if they wished.  And that might work for them if they are, obviously, receiving the balance of their remuneration as dividends, for example.

    Thomas Coughlan: Okay, thank you Bernadette.  A question regarding the taper here, so I'll take that.  So, 'I have a client paying himself a £250,000 dividend from his company, salary £10,000; will he be caught by the taper?'  Yes, he will.  So, the adjusted income definition for the tapered annual allowance includes all of your income, so it's not just earned income, there's also your dividends, interests and all manner of things.  So that £250,000 dividend will be included in your adjusted income, so your taper will be reduced down to £10,000. 

    Although the client will have carry‑forward available from previous years, so it's worth looking back and seeing if he has any unused annual allowance from the previous years that can be added to this year's £10,000 tapered annual allowance.

    Another question for Bernadette: 'I have a few clients that run companies that own rental properties.  Can these limited companies pay employer contributions?'

    Bernadette Lewis: Yeah, so this type of business will be taxed on the investment company basis, where you are – instead of using the wholly‑and‑exclusively test against trading profits, you're using the management expenses test, which, these days, does normally allow you to make an employer contribution of a significant amount. But always with a specific query, it's always safest to check with that business's own accountant, just in case there's something that we've missed in the general interpretation of the rules.

    Because we do know that accountants have to attend their own continuing professional development, where they keep up to date with any specific issues that HMRC is raising on an ongoing basis.

    Thomas Coughlan: Okay, thank you Bernadette.  Another question I'll take: 'So, if a company year‑end is December 2019, can their direct contribution be paid January–March 2020 but then be included in the December 2019 accounts?'  I'm not 100% sure but I would guess that if you want it to be included in December 2019, you've got to pay it before 31st December 2019. 

    I'm not aware of any scope to pay a contribution in a particular accounting period and then carry it back to an earlier period.  So, I think, if you wanted to include it in December 2019, you would have to pay it – you would have had to have paid it before then.  However, that's a question more for the company accountant to deal with, perhaps.

    There's a lot of questions about will there be a recording of the webinar?  We will upload a recording – the audio recording and the slides to the website in the next few days.  And a few questions also around the CPD certificate and one of those will be issued in the coming days as well, so you will get a CPD certificate and it will be sent direct to you, with the email address that you gave us.

    There's a couple more questions but we are – we're running low on time, so I will now hand back to Gareth for closing comments.

    Gareth Davies: Fantastic. Thank you very much, Tom and thanks very much, Bernadette.  So, hopefully this presentation has helped to consolidate your knowledge and remind you of some of the key aspects that you may need to consider for your self‑employed clients.  If you'd like any further information on any of the topics covered, in the first instance please speak to your usual Scottish Widows contact, or you can visit the Scottish Widows advisor extranet to access all of our technical resources. 

    As with previous masterclasses and as Tom just mentioned there, a recording will be placed on the extranet for further review and CPD certificates will also be issued following those – for today's presentation, for those that did attend live.

    Finally, it just remains for me to say thanks once again to Bernadette and Tom for taking us through the slides; another really informative session.  Thank you to all of you for joining us this morning and thank you for the many questions that you've raised.  As Tom said, for those we didn't get to today, we'll issue an answer directly out to you.

    That concludes today's presentation.  Thank you very much for joining us and enjoy the rest of your day.  Thank you very much.

    Operator: That will conclude today's call.  Thank you for your participation; you may now disconnect.

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