Case profile: The 'younger' contractor

Background

Ms Client in mid 30s, single with no children

 IT contractor working through her own limited company

Background

• Insufficient insurance for a self-employed contractor
• Had a large cash lump sum in business and wished to extract it in a tax efficient manner
• Pays herself a salary and dividends but her billing rate is far greater than the total of her expenses, salary and dividends
• Client has pensions from previous employment but no strategy

Challenges

• Created a Financial Plan to give on-going financial direction
• Set up Life Insurance and Critical Illness policy to cover outstanding liability on mortgage. Income Protection policy set up to guarantee income if contractor could not work due to ill health
• Showed client how to extract money from her company tax efficiently. We explained the trade off between National Insurance, Income Tax and Corporation Tax to create tax efficient investments
• Utilised pension rules to maximise company contributions
• New pension set up and incorporated old under-performing pensions. New scheme can be monitored on-line, funds are bought and sold when appropriate and Wealth Matters provide investment bulletin to review funds, every quarter

What we did

• Client fully protected against any death or ill-health risk
• Saved client £10,500 lump sum and £6,300 per annum in tax charges through our tax planning strategies
• New investment strategy improved performance and reduced risk at the same time
• Created tax efficient saving strategy for clients, further reducing their tax bill

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NB: This is an example case history only and is not intended to represent any specific individual or their situation. Its purpose is solely to give you an idea how financial planning could work in a given set of circumstances. We always aim to keep things simple, but should you have any questions relating to the case study above, please feel free to contact your financial planner at Wealth Matters as per the details given on our contacts page.