Maximising Business Value Through Pensions: A Guide for Northamptonshire Business Owners

 

Maximising Business Value Through Pensions: A Guide for Northamptonshire Business Owners

The Strategic Advantage of Pensions for Your Business

As a business owner in Northamptonshire, you're constantly seeking efficient ways to extract value from your company whilst planning for the future. One of the most tax-efficient strategies available to you is through pension contributions, but significant changes are on the horizon that require your attention.

Why Directors’ Pensions Make Business Sense

Immediate Tax Benefits

  • Corporate pension contributions are treated as an allowable business expense, reducing your corporation tax bill.

  • Unlike salary, pension contributions aren't subject to National Insurance contributions.

  • You can extract funds from your business in a tax-efficient manner, building wealth outside your company.

Intelligent Profit Extraction

For Northamptonshire entrepreneurs, directors’ pensions represent more than just retirement planning - they're a strategic business tool that allows you to:

  • Create a secondary asset pool separate from your business

  • Extract company profits more efficiently than through dividends or salary alone

  • Establish financial security independent of business performance

  • Contribute up to £60,000 annually (current annual allowance) with potential to carry forward unused allowances

Three Routes to Extract Business Profits

As a company director, you have three main options for extracting funds:

  1. Salary - Subject to income tax and National Insurance

  2. Dividends - Lower tax rates but no corporation tax relief

  3. Pension contributions - Corporation tax relief with tax-free growth

Critical 2027 Changes You Need to Prepare For

From 6 April 2027, the pension inheritance landscape will change dramatically:

  • Most unused pension funds will no longer be exempt from inheritance tax (IHT)

  • Pension funds could be included in your estate for IHT purposes

  • Lump sum death benefits could become liable for IHT at 40%

  • Even funds paid at the discretion of trustees could fall within your taxable estate

This represents a significant shift from the current rules, where pensions typically sit outside your estate for IHT purposes.

Strategic Planning for Northamptonshire Business Owners

With less than two years until these changes take effect, local business owners should:

  1. Review your current pension arrangements - understand how the 2027 changes will impact your specific situation

  2. Consider estate planning strategies - explore options to minimise future IHT exposure

  3. Explore business succession planning - integrate pension planning with your overall business exit strategy

  4. Assess your pension beneficiary nominations - ensure they align with your wishes under the new rules

Why Act Now?

The window for optimal estate planning in light of these upcoming changes is closing. By reviewing your arrangements before April 2027, Northamptonshire business owners can:

  • Potentially save significant amounts in future inheritance tax

  • Structure your affairs to maximise family wealth preservation

  • Create a more resilient financial foundation separate from business assets

How Positive Advisers Can Help

As independent financial advisers based in Northamptonshire, we understand the unique challenges facing local business owners. Our team, operating under the FCA-authorised umbrella of New Leaf Distribution, can help you navigate these upcoming changes and develop a strategy that protects both your business interests and family legacy.

Take the Next Step

Complete our form below, and one of our experts will call you within 24 hours to discuss how these pension changes might affect your business and what steps you can take to prepare.

The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.