UK's 'ostrich generation' is failing to plan for retirement

A new report suggests that only 39% of Britons have a financial plan to save for their retirement, even though a majority expect work pensions to become less generous.

The HSBC survey, which quizzed 17,000 people in 17 countries, found that virtually half of those asked in the UK thought they would be worse off in their old age than their parents (compared to just 27% who thought they would be better off). 68% of respondents are worried about coping financially and 48% fear they are not saving enough for their retirement, rising to 57% among women in their 30s and 40s.

Despite this, nearly one in five UK respondents said they didn’t know what their main source of retirement income would be, with a further 21% saying they will rely on the state pension.

The National Association of Pension Funds said: "We must begin to think differently about the way we approach financial planning for retirement. The report suggests that Britons currently have a culture of dependency on the state, which is a false economy. People have to take greater personal responsibility for their retirement and rely less on the state, by planning more effectively and saving more for themselves."

The 39% of Britons who claimed they did have a financial plan for retirement compares with 84% of people in Malaysia.

"The emergence of this ostrich generation is a real concern. Britons know that they need to plan and save more for their retirement, yet they are not turning this knowledge into action," said David Wells, head of investments, pensions and savings at HSBC.

If you would like to discuss this further, give us a ring 0845 258 1445

Reducing payments on account

Payments on account are normally equal to 50% of the previous year’s net liability. A claim can be made to reduce your payments on account, if appropriate, although interest will be charged if your actual liability is more than the reduced amount paid on account.

Do not wait until it’s too late – please keep us informed of any factors which might affect your tax liability.


We can only suggest business solutions if you tell us in good time about any issues facing your business.


Payments on account will not be required where the net liability does not exceed £1,000, or where the self assessment tax/NIC is less than 20% of the previous year’s total income tax/Class 4 NIC liability (instead, the full liability is due on 31 January after the tax year).

Case Study 3

Isabelle is self-employed. Her accounts are made up to 31 August each year. When we prepare the 2010 Return we will be including her profit for the year ended 31 August 2009, and that is the profit which will be taxed for 2009/10.


Isabelle’s payments on account for 2010/11 will automatically be based on the 2009/10 liability.


If we know that Isabelle’s profits for the year to 31 August 2010 are significantly less than the previous year, we can discuss the figures, perhaps even prepare the annual accounts, and make a claim to reduce Isabelle’s 2010/11 payments on account, easing her cash flow by reducing the tax payments due in January and July 2011.


If you need help with your accounts, give us a ring today 0845 258 1445.

Don't Forget......

That the following is due for payment.




19 July             PAYE/NIC and CIS deductions due for the month to 5th July 2011
19 July             PAYE/NIC due for quarter ending 5th July 2011
19 July             Class 1A NICs for 2010/11 due


Having problems with PAYE/NIC or if your new to all the above, why don't you give us a ring today.  We could help!  0845 258 1445

Tax payment dates

The timetable of tax payments is relatively straightforward for the self-employed.

• 31 January in the tax year, first payment on account
• 31 July after the tax year, second payment on account
• 31 January after the tax year, balancing payment

There is also a system of interest and surcharges to encourage prompt payment.

For example, if you do not make your full 2009/10 balancing payment by 28 February 2011, HMRC will add a 5% surcharge as well as the interest that will be charged from 1 February 2011. Delay until after 31 July 2011, and a further 5% surcharge in addition to the interest will be added. In addition interest is charged on outstanding surcharges, as well as on unpaid tax and NICs.

If you have incorporated your business the company will be paying corporation tax. Corporation tax is normally payable nine months and one day after the end of the accounting period.

If cash flow is tight, HMRC could be persuaded to accept a spreading of your next business tax payment – you will have to pay interest at the HMRC rate, but keep to the agreed schedule and surcharges will be waived. Arrangements need to be put in place before the due date for paying the tax, so talk to us in good time if you need or wish to apply.

Planning ahead of the year end

Tax and financial planning should not be left until the end of the tax or financial year, but in advance of the end of YOUR business year. Issues to consider include:

• The impact on your tax position and financial results of accelerating expenditure into the current financial year, or deferring it into the next
• Additional pension contributions or reviewing your pension arrangements
• How you might take profits from your business at the smallest tax cost, and how the timing of payment of dividends and bonuses can reduce or defer tax
• Avoiding overvaluing stock and work in progress
• Improvements to your billing systems and record keeping, or a general systems review to improve profitability and cash flow

National insurance efficiency and employee remuneration packages with potential cost savings for both you and your employees.


Remember if you need help or advice, give us a try. 

Owner-directors: increasing net income

As an example, consider how much you might save if, as an owner-director, you wanted to extract the £10,000 profit (pre-tax) your company makes in 2010/11 by way of a dividend rather than a bonus.

Case Study 2

As you can see in this case study, the net income is increased by more than 13% by opting to declare a dividend. Be sure to discuss this with us, as this is a complex area of tax law. 

	Bonus £	Dividend £
Profit to extract	10,000	10,000
Employers’ NIC	- 1,135
Gross bonus	8,865
Corporation tax		-2,100
Dividend		7,900
Employees’ NIC	- 89
Income tax @ 40%	- 3,546
Additional tax		- 1,975
Net amount extracted	£5,230	£5,925

Please note that in Case Study 2 we assume that you are paying higher rate tax at 40%, and that your earnings exceed the so-called ‘upper limit’ for NICs. There are many matters to be considered when deciding whether directors should be paid by dividend or salary/bonus. In practice, a combination of each is often an appropriate course.

Remember that dividends are usually payable to all shareholders. Although it is possible to waive dividends, this can result in tax complications, so a better option may be to have different classes of share. Finally, you need to consider with us the effect of regular dividend payments on the valuation of shares in your company.

Remember you can always give us a call!

National insurance: your liability

Although leaving profits in the company can be tax-efficient, you need money to live on, so you should consider the best ways to extract profits.

A salary will meet most of your needs, but do not overlook the use of benefits, which may save income tax and could also result in a lower national insurance liability.
Six ways to save NICs:

• Increasing the amount the employer contracts to contribute to company pension schemes (subject to allowance not being exceeded)
• Share incentive plans (shares bought out of pre-tax and pre-NIC income)
• For companies, disincorporation and instead operating as a sole trader or partnership
• Instead of more salary, paying a bonus to reduce employee (not director) contributions
• Paying dividends instead of bonuses to owner-directors
• Provision of childcare and other tax-free benefits. 

Any questions?  give us a ring today on 0845 258 1445

Forming a limited company

You could form a limited company if the limitation of liability is an important consideration – but do bear in mind that banks and other creditors often require personal guarantees from directors for company borrowings.

Trading through a limited company can be an effective way of sheltering profits. Profits paid out in the form of salaries, bonuses, or dividends may be liable to top tax rates, whereas profits retained in the company will be taxed at rates from as low as 21% (20% from April 2011).


Retained funds can be used to buy equipment or to provide for pensions – both of which are eligible for tax relief. They could be used to fund dividends when profits are scarce (spreading income into years when you might be liable to a lower rate of income tax?) or capitalised and taxed at 10% or 18%/28% on a liquidation or sale. Forming a partnership with your own limited company or introducing limited partners into your partnership or limited liability partnership (LLP) can create tax-saving opportunities.


An increasing number of businesses have incorporated, or introduced limited partners, but there are important implications which we would be happy to discuss with you, before you decide whether or not to incorporate your business.