Thinking ahead when it comes to retirement planning is vital for any business owner who wants to enjoy a financially comfortable life in their later years and pass on their successes to the next generation in a tax-efficient and sensible way.
Life expectancy is on the rise and healthcare is becoming more and more advanced, meaning that many people are now living for 20 to 30 years after they retire.
Being a business owner can be a big advantage when it comes to retirement, with the potential to receive an income after you have stopped work or to live from the proceeds of a sale. However, with these potential advantages come a range of complex considerations.
Selling a business
Anyone planning on selling a business should first ensure that its finances are optimised to help secure the best possible selling price. This could take several years to achieve. They also need to think about whether they will dispose of the business by way of a sale of shares or assets and the tax implications of their decision.
Overcoming Capital Gains Tax
One of the most significant taxes to consider is Capital Gains Tax, which is currently levied at 20 per cent for higher rate taxpayers. The exception to this is where gains are eligible for Entrepreneurs’ Relief.
This is a great way to maximise income from the sale of a business, halving the tax rate from 20 per cent to 10 per cent, where a business owner holds at least five per cent of the shares.
Pensions are one of the most important aspects of retirement planning – and often the first port of call for many business owners.
It is important to structure your investments in a tax-efficient way and ensure that the contributions you pay towards your pensions benefit from tax relief where appropriate.
Exploring all options
On top of this, it is always wise to consider alternative investment options such as buy-to-let property, which is not without its challenges but can still prove to be very profitable if the right advice is sought.
Preparing for retirement can often look like a minefield at first glance, but with the right advice, it is easy to plan ahead for a comfortable and tax-efficient future.
To find out how our expert team at MGI Midgley Snelling LLP can help, please get in touch today.