Self employed retirement plan

[Stakeknife]

Hello, I'm looking to manage my savings for retirement age.
Currently I'm self employed through CIS scheme. I currently have a standard ISA with my bank, some shares through HL and save a bit into a saving account each month.
I was going to set up a stocks and shares ISA with HL but not sure what would be best to be honest.
Would a SIPP offer more in the long term but come withdrawing time the tax offset would reduce the benefit. Ideally I wouldn't want to pay tax when I want to withdraw it. Could any contributions reduce my earnings on my tax return meaning I pay less tax?

It won't be a massive pot (I'm 34) but hopefully drip feeding every month and choosing the best plan may leave me with something.
My current ISA obviously doesn't gain much and while I don't spend any of it I did loan some to myself for a new car and I pay myself it back each month. Maybe S+S ISA and SIPP would be best?
Thankyou.

[BoRED S2upid]

Speak to a professional. So many variables to consider. Will you be self employed long term? Cash ISA is pointless so move that to S&S ASAP drip feeding into it is a sensible idea.

[Stakeknife]

Ive worked for the current company self employed (10+ yrs) for a while tbh and probably will do a while longer.
Yea moving from the ISA to a SS ISA would be a good starting point I would think.

[xeny]

Stakeknife said:

Would a SIPP offer more in the long term but come withdrawing time the tax offset would reduce the benefit. Ideally I wouldn't want to pay tax when I want to withdraw it. Could any contributions reduce my earnings on my tax return meaning I pay less tax?

Apologies if you already know, but at a simple level, you don't pay tax on the money going into a pension, the trade off is you pay tax on 75% of it when it comes back out, so overall with a pension, presuming the government doesn't move the goalposts, you come out ahead on income tax, even though there is taxation on withdrawals.

[TwigtheWonderkid]

xeny said:

Apologies if you already know, but at a simple level, you don't pay tax on the money going into a pension, the trade off is you pay tax on 75% of it when it comes back out, so overall with a pension, presuming the government doesn't move the goalposts, you come out ahead on income tax, even though there is taxation on withdrawals.

You don't pay any tax on the 75% of the taxable pot if you can keep your withdrawals within your personal allowance. If you retire before state pension age, that means currently you can get £12570 a year out tax free from your taxable portion. The state pension is circa £9K/year so even with that, you can get £3K+ out tax free.

[mikeiow]

TwigtheWonderkid said:

xeny said:

Apologies if you already know, but at a simple level, you don't pay tax on the money going into a pension, the trade off is you pay tax on 75% of it when it comes back out, so overall with a pension, presuming the government doesn't move the goalposts, you come out ahead on income tax, even though there is taxation on withdrawals.

You don't pay any tax on the 75% of the taxable pot if you can keep your withdrawals within your personal allowance. If you retire before state pension age, that means currently you can get £12570 a year out tax free from your taxable portion. The state pension is circa £9K/year so even with that, you can get £3K+ out tax free.

Indeed: Xeny, your statement is pretty inaccurate!
When you take pension out, it is classed as income....so some tax-free, some at 20%, etc.
You can take 25% as a tax free lump sum, or indeed take that tax-free element as part of a monthly draw.

There is the LTA to consider - if you have pension valued over that figure (over £1M), then you can face additional tax, but not 75% !

OP, this is a complex subject...but in a nutshell, pensions are perhaps THE most tax-efficient way to save long term, particularly if you are a 40% tax-payer.
Perhaps hop on the IM pension thread and have a chat there

[Stakeknife]

Thanks everyone for the input so far.

[xeny]

mikeiow said:

Indeed: Xeny, your statement is pretty inaccurate!

It was intended as the simplest response to original post which seemed even further from accurate:

Stakeknife said:

Would a SIPP offer more in the long term but come withdrawing time the tax offset would reduce the benefit. Ideally I wouldn't want to pay tax when I want to withdraw it. Could any contributions reduce my earnings on my tax return meaning I pay less tax?