Make 2024 your most tax-efficient year ever!
The problem with New Year’s resolutions is picking something achievable, something that is going to add real value to your 2024, is attainable, and is maintainable. To make our 2024 resolutions a success, the real questions are, ‘How do I solve the challenges of 2023?’, ‘Is it realistic?’ and ‘Where do I start?’.
The unavoidable by-product of business profit is business tax; fact!
But there are plenty of ways to ensure that your financial situation is configured in such a way that you are taking full advantage of all tax benefits and allowances that could be available to you with the right structure.
Whatever your plans for your business in 2024, it is essential they include taking stock of your tax liabilities, and ensuring you have the most efficient structures in place to protect your business and wealth.
Did you know there are over 1,000 tax reliefs and benefits
available to business owners?
Did you identify and make the most of the tax reliefs and benefits available to you in 2023? If not, the new year is the perfect time to reduce your tax liabilities whilst continuing to grow your business and wealth.
How? By implementing a Lifetime Business Tax Plan
Put simply, the Lifetime Business Tax Plan is a powerful and flexible vehicle that enables alignment of your business, wealth, investments, and overall financial situation. By doing so, you are creating a structure that legally allows the implementation of strategies that minimise your tax liability. It is created and tailored to your individual situation, allowing you to take full control of your tax planning strategy.
The benefits of the Lifetime Business Tax Plan:
- Invest or hold company cash without 40% tax charge
- Invest in property using company profits or pension funds, without excessive tax liability
- Mitigate Corporation and Inheritance Tax
- Grow your business and pension without tax penalties
- Loan pension funds to the trading company
- Gain access to wider investment choices
- Ring-fence assets for inheritance
- Protect family wealth and assets
- Combine and pool funds
- Control over your funds and investments
Trading business or Investment business?
Many business owners are unaware that investing or holding excess company cash in their trading company puts them at risk of being deemed an investment company by HMRC. This could result in loss of eligibility for Business Property Relief and leave company cash at risk of a hefty 40% tax penalty!
HMRC use what are known as a a series of 20% tests to determine whether the cash in your company represents more than 20% of the balance sheet, or more than 20% of the turnover/profit. However, with a Lifetime Business Tax Plan, you can mitigate this risk.
The Family Investment Company
A Family Investment Company is a private company, set up to protect family wealth, hold assets and mitigate tax, all within HMRC rules. Shareholders of the original trading company can move company cash into the Family Investment Company, whilst maintaining full control of that cash. The cash is held in trust for the benefit of the company director’s family, removing the Inheritance Tax liability and allowing the beneficiaries to receive the full balance.
This surplus cash, now situated outside of the trading company and within a valid investment company, can also be invested in a variety of asset classes, from property to shares, enabling growth of funds. Funds can be moved around within the Lifetime Business Tax plan, to suit the chosen strategies. Capital gains tax will apply to the gains made through those investments (unless coupled with a SSAS to create a Lifetime Business Tax Plan – more info on this later!), but NOT the actual cash held. As a trust, the plan is afforded its own set of rules, that can further facilitate mitigation of tax and achieve elevated growth.
Key benefits:
- 0% Corporation Tax on existing retained profits
- Transfer funds back to your company
- Invest in property or other asset classes
- Retain business property relief (BPR)
- Protect assets and wealth from Inheritance Tax (IHT)
- Create a Lifetime legacy
The Small Self-Administered Scheme
The SSAS is a corporate pension scheme available exclusively to business owners. It can receive profits from the Family Investment Company or other sources, without suffering a tax charge. It can also receive your current pensions, which you can pool with those of your family members or other key employees, to increase investment potential. These funds can be used to invest in your business (for any valid business purpose), or in assets such as commercial property and development land.
Key benefits:
- No Capital Gains Tax, Corporation Tax, or Income Tax
- 0% tax on investment returns
- Invest historic or current pension funds into your own business
- Pool pensions with other company or family members to achieve greater investment power
- Invest in commercial property
- Purchase your own business premises using your SSAS
- Ring-fence assets
- Create a more flexible retirement plan, to the benefit of yourself, your successors and beneficiaries
- Create a robust succession plan for business
When combining the Family Investment Company and a Small Self-Administered Scheme,, the resulting Lifetime Business Tax Plan allows for innovative strategies to be created for you, your business, and your family. It is a powerful, all-in-one solution to protecting wealth at the same time as growing it for the generations to come.
TLPI has the experience and expertise to understand your personal goals and strategies, and create a bespoke and personal product that affords you maximum flexibility. Contact TLPI today to kick off 2024 in the right way and get started on your tax planning journey.
