Making the most of your wealth: we’re talking tax

Nobody wants to pay more tax than they have to, but did you know that some aspects of the way you structure and run your business can have a huge impact on your tax bill?

Whereas tax alone should not be the driver, there are several basic matters to consider:

  • Would it bring tax benefits to employ your partner or a relative?
  • Is your business structure the most tax-efficient? Would it be better to operate as a partnership or LLP (limited liability partnership) or as a limited liability company?
  • If you are thinking about investing in new machinery or equipment, the timing can be critical to gaining the quickest or most tax relief.
  • If you own assets that would give rise to a capital gain upon disposal do you hold the assets in a way that would minimise the capital gains tax bill?
  • Entrepreneurs’ relief – which reduces the capital gains tax rate to 10 per cent (from 18 or 28 per cent) – is only available in certain circumstances. So you must be careful that the business structure, or the way you own or hold assets, does not mean that you miss out on this relief.
  • When you’ve made your wealth, you will want to protect it. Are there tax-efficient investments or tax schemes you could consider?
  • Is there a place for a trust in your tax planning or will? Trusts are not just for the very wealthy but offer a flexible planning tool for a wide range of taxpayers.
  • When it comes to a future inheritance tax bill, the way your assets are held could mean the difference between 100 per cent business property relief, 50 per cent relief, or none at all. On a £500,000 asset, this could result in an avoidable tax bill of up to £200,000!

In structuring your business or the way you hold assets to save tax now, you need to take care that the steps you take will not increase your tax bill in the future. With expert advice, you can make significant tax and national insurance savings without creating future difficulties, while maintaining flexibility in the way in which you are able to deal with assets and also legitimately protecting them from creditors.

If you would like more information about business and personal tax issues, please get in touch – I’d be delighted to hear from you.

Posted in Misc.