IPT or Liquidation Reserve? The IPT is more tax-advantageous
2 min read
Which choice at the end of your financial year?
At the end of your financial year, you often face the choice: do you set up a liquidation reserve, or are you better off doing (an optimisation of) an IPT (an individual pension commitment funded by your company). Well, that choice is clearly in favour of the IPT. Roughly speaking, through the IPT you move money from the company to your private assets at a tax rate of 21%, whereas through the liquidation reserve this is at least 29%.
What about the liquidity of my funds?
If you choose IPT, you withdraw money from the company in a tax-friendly way, and this money becomes available again in your private assets from your retirement onwards. But... did you know that today you can already use your IPT to finance real estate in the private sphere? In that sense, an IPT is often more flexible than assumed.
What are the possibilities for investing available reserves within the company?
If you do choose liquidation reserve, wholly or partly, you should also make sure it can be paid out at some point. In this case, Life Experts also offers the perfect solution for investing your company funds.
Would you like to know more about your options at the end of the financial year?
Then ask one of our experts for advice.
We made a number of additional assumptions for the calculation of the IPT. This makes the comparison with liquidation reserve clearer. We work with a duration of 1 year, municipal tax was estimated at 7%, and the return calculation also takes into account an annual management cost of 0,1% on the savings reserve of the IPT. For more information about the taxation on the maturity date of the IPT, you can read more here.
Questions about your own situation?
This article is general information. Your adviser will look at what it means for you.