Business owners inevitably spend a great deal of time focusing on the day-to-day management of their business. While crucial, it is just as important to consider the wider picture and plan for the future once they have gone.
I am a solicitor specialising in Wills, Trusts, Estate Administration and Inheritance Tax Planning. Having originally trained in Teesside, following two years working at a Newcastle firm I am pleased to join Tees Valley’s largest law firm, Tilly Bailey & Irvine.
It is important that your will is drafted not in isolation, but in conjunction with your trusted business advisors to ensure that it harmonises with the wider succession planning. All too often, individuals have wills put in place that contradict the provisions of the business’ governing documents, such as Partnership Agreements and Shareholders’ Agreements. Conflicting provisions can open the door to expense, unwanted litigation and stress for all involved – even loved ones.
The tax implication of death also needs to be carefully planned. On death, each individual receives a “nil rate band”, or an allowance that is not taxed (or taxed at 0%). This band is currently set at £325,000.
Once over this threshold, inheritance tax is payable at a rate of 40%. In addition to the standard nil rate band, the residence nil rate band may be available if you leave property to your descendants. Currently the allowance is £125,000, rising to £175,000 in the 2020/21 tax year.
Business owners can benefit from an additional tax relief on death called Business Property Relief (“BPR”). BPR is subject to a number of conditions, including that assets must have been held for at least two years. If applicable, it is available at a rate of either 50% or 100%, depending upon the structure of your business. Through careful tax planning, business owners can seek to make use of this important relief, and in some circumstances make use of it twice, to reduce the value of their taxable estate.
Putting in place careful planning for both your business and personal affairs can lead to significant tax savings on death, and ensure that your wishes are carried out.
Tilly Bailey & Irvine’s well established Private Client team is 10-strong, consisting of solicitors in Hartlepool, Stockton, Barnard Castle and Wynyard branches. I am based at the firm’s commercial office at Wynyard Business Park to enhance the Private Client offering to the firm’s business clients and, in particular, focus on tax planning for high net worth individuals. Call us on 01740 669248 to discuss matters.
These articles will be published through our website www.tbilaw.co.uk and social media platforms. If, however, you would like to speak to me, or one of my colleagues to find out more about the business services we offer, please contact me directly at [email protected] or via our Commercial Law office at Wynyard Business Park on 01740 669248.
These articles will be published through our website, Facebook and Twitter pages. If, however, you would like to speak to me, or one of my colleagues to find out more about the business services we offer, please contact me directly at [email protected] or via our Commercial Law office at Wynyard Business Park on 01740 669248.