So, you have a successful business – and you’ve considered taking all possible steps to make and retrain the most profit possible. Now you need to think about the future and how you invest your profits to best effect.
Before continuing, I must make it clear that I am not a financial advisor. This email simply highlights some issues you may want to think about. It does not constitute investment advice. Before making any investment, you should take appropriate financial advice but remember that although financial advice is a regulated sector, not all advisors have the same independence in recommending products to you. They may be tied, for example to offering only products provided by their employer.
It really does make sense to make yourself aware of the full range of products available to you before investing. The following examples may provide food for thought:
- Pension funds and ISAs are similar in that income and gains they produce are free of tax. There are, however, important differences and you need to balance the value of immediate tax relief against future requirements when considering your options.
- With an ISA, you can access the whole of the fund at any time. To access your pension funds you have to have reached pensionable age (potentially well below normal retirement age) and there is a maximum proportion you can take as a tax-free lump sum. The balance of the funds is then taken as income and taxed as such.
- With a self-invested pension fund, it may be possible to make contributions and benefit from tax relief in a way that has little or no cash flow impact on your business.
- With lump sum investments, different products may produce significantly different results. There are products that will produce income tax relief, capital gains tax deferral or relief and inheritance tax relief at various levels of investment and at various rates.
- What level of risk are you prepared to take for a required level of income or growth?
An independent advisor will fully explain all available products – and their differences – to you to provide you with a full understanding of what you are getting.
For more information, or to discuss your particular circumstances, please get in touch – I’d be delighted to hear from you. Alternatively, for independent financial advice, please contact my colleague, Steve Horton.