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Hello Raj, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
Is you business registered for VAT? In its old format it was below the turnover threshold at 82K, but now it clearly breaches that so registration and VAT accounting are now mandatory.
Using a company minimises your personal tax exposure and as it is a separate legal entity places a barrier between you and your business activities should there be some disastrous outcome. I would suggest that a company is the way forward; Corporation Tax is currently 20%. Remember that if you are a director of the company you are an employee per se and must be remunerated through PAYE channels. Another accounting complication to get around!
You are correct that these days pension contributions are only allowable at the basic rate of tax and the annual limit is steadily reducing, now standing at 40K. With interest rates at an all time low returns on pension funds are stagnant.
I do hope I have covered everything in your question. If not do not hesitate to follow up. I do hope that you have found my reply useful.
Well, I have to tell you Raj, that the private pension route is one of the best methods of tax avoidance! The company can make these direct up to the annual limit, currently 40K, and they are allowable against the Corporation Tax (CT) assessment. I cannot go much further as I am not licenced to give investment advice save in very general terms (like stick it in the building society); I am not an Independent Financial Adviser.
I cannot see any point in running more than one company, it seems an over complication save, of course, if the respective turnovers are below the threshold then VAT accounting is eliminated. By the by, if you work from home then the running costs of one room can be offset against CT liability.
I do hope we are moving forward.
Thank you for your support.
No need for further action on your side, you have rated me, you have been charged for the advice and I have received my proportion.