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The sale process tends to be all consuming and the selling shareholders will usually be surrounded by a team of corporate advisers through the course of securing the deal and seeing it through.
In contrast, a recent survey found that 80% of business owners haven’t accessed any personal wealth planning advice. Of course, there is an understandable temptation for business owners to put personal planning on the back burner until when and crucially if the sale of the business completes. But this means many will miss out on an opportunity to significantly reduce their family’s future tax exposure.
The good news is that if you are looking towards or in the midst of the process of exiting your business, a little attention on the personal planning front ahead of completion could secure six figure personal tax savings.
There is, for example, a time sensitive opportunity to earmark a significant portion of the sale proceeds for the future benefit of children and grandchildren. This involves taking advantage of business property relief (BPR)attaching to the shares:
An individual considering trust planning post sale of the business will only be able to set aside £325,000 in trust every 7 years without triggering an immediate inheritance tax charge. This is based on the current ‘nil rate band’ and assuming there have been no previous gifts into trust. In contrast, pre-sale trust planning offers an opportunity to set aside a much more significant sum, well in excess of an individual or couple’s combined nil rate bands, for the benefit of the next and successive generations. Expert advice is, however, vital so that the business owners are able to make well informed choices and navigate potential pitfalls:
If you are planning your exit or already immersed in the process, involving wealth planning experts will unlock the potential for this and other pre-sale steps which can achieve significant personal tax savings. It is particularly important that your personal wealth planning advisors are well versed in working closely with the corporate team. This helps ensure your personal planning dovetails with what is feasible from a business perspective and that timing is aligned which is critical to pre-sale personal planning success.
Thinking about personal planning pre-sale also means an opportunity to start a dialogue and build trusted advisor relationships from a legal, tax and financial planning perspective. These should help you optimise and enjoy the wealth emanating from the sale, into retirement, a new business venture or whatever else might come next. They should also help you begin to formulate a strategy that aligns with your personal ethos when it comes to passing wealth down to the next generation protected as far as possible from undue tax and other risks.
19 October 2022