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Entrepreneurs and personal allowances

Gresham Wealth

Increased Tax Relief for Business Owners

Since April 2023, the main corporation tax rate has risen to 25% for businesses with profits exceeding £250,000. Pension contributions remain a tax-efficient way for business owners to manage their taxable profits. Instead of taking profits as dividends (which are taxed after corporation tax), directing them into an employer pension contribution provides full tax relief, making it a highly efficient strategy.

Retain the Personal Allowance

Personal contributions can help reclaim the personal allowance, which is gradually lost when adjusted net income exceeds £100,000. The allowance is completely lost at £125,140, meaning that pension contributions reducing income within this range offer an effective tax relief rate of 60%.

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