James Hall: Take care in retirement

Jul 2 2010 By James Hall

After a lifetime of hard work, building up a small - or even larger – enterprise and making as much of a success of things as is possible, most business people want to be able to retire and enjoy the rewards that their toil should have brought.

To really maximise those rewards, however, careful planning should always be undertaken to mitigate tax liabilities as well as other unwelcome financial diversions.

Retirement from business can take multiple forms but can be commonly seen in a sale of the enterprise or a transfer to family members, for example. Birmingham is built on family businesses and so the handing over of the reins to the next generation is commonplace.

In relieving oneself of these responsibilities there are certain tax reliefs that can be considered but around which careful tax planning should always be undertaken. The use of Entrepreneurs Relief when handing over to family members can be a tricky matter and advice on ‘phasing’ retirement is something that really should be sought, as an example.

Inheritance Tax planning is another key matter; while many business assets enjoy appropriate relief from tax on death, selling up or moving on will deprive a business owner of these reliefs and they should compensate with relevant planning.

There is also the issue of income. While working, the family can depend on a salary, drawings or other such income being provided.

Most people experience a savage drop in income upon retirement, something which should be addressed with the help of a good Independent Financial Adviser.

If contemplating retirement and business exit, good advice – preferably at least a couple of years before the fact – is important.

If you are contemplating your imminent retirement, whatever that retirement may hold, speak to your most trusted professional adviser. Be they solicitor, accountant or IFA, they can help you make the most of things.

* James Hall is an associate at Clarke Willmott in Birmingham