Taking care of business, at work and at home
A successful business owner, James had spent years ignoring his personal finances. Here’s how we helped him and his family.
James had been running a consultancy business for many years.
Much of his time and energy was focused on the business; he had somewhat neglected his personal finances.
He had a young family, so wanted to make sure they were secure. He was also aware that he should be planning for retirement, having worked hard to grow his business for many years.
James decided he wanted to do more to improve his own financial position. However, he didn’t have the time, energy or expertise to do this properly on his own.
How we helped.
We initially looked at the profitability of James’ business, analysing the balance sheet and retained profits. We worked out that James could be extracting far more from the business if he utilised the full annual pensions allowance for both him and his wife.
We set up an appropriate pension arrangement for him to do so, which allowed for very flexible levels of contributions on both a regular and ad-hoc basis. James and his wife could then extract more money from the business without paying income tax, reducing their corporation tax liabilities over several years by tens of thousands of pounds.
We also worked with James’s accountant to ensure his income tax was minimised. We have been monitoring this to make sure he is not affected by the reduced annual allowance. Furthermore, we set up a Relevant Life Policy, which is a very tax-efficient way for James to provide life assurance benefits for his family.
What was the outcome?
James has significantly reduced his reliance on the sale of his business to ensure he has a happy retirement.
By extracting profits through employer pension contributions, he has both capitalised on some of the value of his business and reduced the amount of tax he has paid on the profits. James now knows he can expect a secure retirement, regardless of what happens to his business in the future.
James has also improved the security of his family by effecting a life assurance plan in a trust paid for by the business, the proceeds of which would be outside of his estate for inheritance tax purposes.