Plan ahead and keep tax implications in mind to ensure you profit from all your hard work
| | Maximising proceeds from the sale of your business
Plan ahead and keep tax implications in mind to ensure you profit from all your hard work.
Choosing to sell their business is one of the biggest decisions any business owner will ever have to make. After spending years â often decades â building something from the ground up, letting go can understandably be incredibly difficult.
With such a big change coming to your professional and personal life, itâs essential to plan ahead. While getting the sale over the line might seem like the most pressing concern, failure to consider the tax implications of the sale might mean youâre unable to fully enjoy the fruits of your hard work.
Whatever life after an exit holds for you, here are some of the main things to consider when approaching a business sale.
Business Asset Disposal Relief
Formerly known as Entrepreneursâ Relief, this allows the first £1 million of proceeds from a sale to be taxed at 10% rather than the 20% rate of Capital Gains Tax. A spouse or civil partner can also claim the same relief under certain conditions, meaning proceeds of up to £2 million can be taxed at the lower rate. Seek advice ahead of a sale to see whether you qualify.
Income after the sale
Depending on your plans, you should consider how much you require each year for the life you and your family wish to lead, always bearing in mind current taxes such as Income Tax and Capital Gains Tax, as well as future taxes such as Inheritance Tax (IHT). We can talk you through options such as pensions, an IHT-efficient trust that pays an income, ISAs and other tax wrappers. | | |
Business Relief
A trading business typically qualifies for 100% Business Relief and can therefore be passed on free from IHT upon the death of the owner. Once you sell the business, however, you hold cash and therefore lose the exemption. IHT is charged at 40% on the portion of your estate above £325,000, so it makes sense to find tax-efficient ways to provide an income.
After the sale, owners have 36 months to re-invest some or all the proceeds into other Business Relief-qualifying investments and assets and recover the IHT exemption.
Trusts
To reduce the IHT burden after a sale, you can put gifts for beneficiaries into a trust. If you live for seven years after doing so, the gift will be free of IHT. Trusts are a good way to protect your business sale proceeds from adverse events and can be set up for friends or family. The trustee makes the decisions about what gets paid out and to whom.
Take advice
If you plan to sell your business, a financial consultant from Cooper Associates Wealth Management Ltd can help you make the decisions that are most beneficial for you and your familyâs finances.
To find out more please call us on 01823 273130 or visit www.cooperassociateswm.com/
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The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority. | | |
Cooper Associates Wealth Management Ltd is a Senior Partner Practice of St. Jamesâs Place Wealth Management.
The Senior Partner Practice is an Appointed Representative of and represents only St. Jamesâs Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Groupâs wealth management products and services, more details of which are set out on the Groupâs website. The title âSenior Partner Practiceâ is the marketing term used to describe St. Jamesâs Place Representatives.
Cooper Associates Wealth Management is registered in England & Wales No. 06890675. Registered Office: 40 St James Buildings, St James Street, Taunton, Somerset TA1 1JR | | |
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