Mattioli Woods wealth management – business planning and exits

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At Mattioli Woods, we specialise in holistic financial planning, tailored to meet your objectives and personal circumstances. Though we offer a wide range of financial planning solutions geared towards clients in various walks of life, we have many clients who are business owners, and we therefore have specialist expertise in advising those moving from business ownership to retirement.

Exit planning and early engagement

Beginning the financial planning process early enough will likely ensure a smoother transition into retirement and through later life, and setting out long-term objectives early in the process allows us to collaboratively put in place the correct provisions to begin achieving your goals.

Planning well in advance allows for effective tax mitigation and investment strategies to ensure that business sale structure aligns with long-term goals. You may have various long-term objectives such as planning for retirement, inheritance planning, gifting, and ensuring capital is removed from the business as tax efficiently as possible.

Many of these can be achieved post business sale (and this may be the only viable option) as the capital from your business is released. However, before sale – and with respect to your long-term objectives – there are financial planning avenues that can be considered.

It is important to note that there can be a crossover of investment solutions between pre and post business exit. Some solutions are referenced in the ‘pre exit’ section, whereas other solutions may be mentioned in the ‘post exit’ section.

While some solutions may be more obvious when businesses are still trading and others more likely after ceasing trading, the reality is that bespoke suitability will need to be considered before any recommendation and there should not be a ‘one-size-fits-all’ approach.

Pre exit

Contributions to pensions Leveraging pension contributions is an important pre-sale financial planning tool. Strategies such as maximising pension allowances (including the use of carrying forward unused previous years’ pension allowances) enable business owners to shelter more wealth from taxation and National Insurance.

In addition, the use of multi-member self-invested personal pensions (SIPPs) or small self-administered schemes (SSAS) can enable the business owner to pool pension funds with family members for investment in assets like investment funds, private equity, and commercial property. Pre-sale, it is potentially possible to purchase your commercial business premises via a pension that offers potential investment efficiency and tax savings.

Further investments and estate planning

For those with a higher appetite for risk, incorporating investments such as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) is an option. Both solutions provide upfront income tax relief of 30%, helping to mitigate tax liabilities that have arisen elsewhere. This could be potentially advantageous while still drawing income from the business.

In addition to the above, dividends from VCTs are tax free, providing another potential stream of income throughout retirement. While EIS dividends are taxable, these products allow for deferral of capital gains tax (CGT) on other assets and are exempt from IHT after two years of holding.

Combined with EISs, utilising other methods for IHT mitigation, such as the use of trusts, can ensure that your wealth continues to grow and is preserved for future generations.

Post exit

Naturally, one of the key factors to plan for is putting your business proceeds to use in order to provide you with your desired level of income throughout retirement and ensuring this can be sustained for the remainder of your life, providing you with the financial freedom you have worked hard to achieve.

Alongside income security, robust planning post sale can help to ensure that the provisions are put in place for an efficient transfer of your wealth onto the next generation.

Business Asset Disposal Relief

In order to get the most value out of your business exit, work should be undertaken to ensure the available reliefs are being utilised. One significant relief is Business Asset Disposal Relief (BADR), which allows business owners to pay a reduced CGT rate on the sale of qualifying business assets. By carefully structuring the sale and ensuring it meets the criteria for BADR, owners can retain more of their profits post sale.

Once the business is sold, the next step in financial planning involves strategically investing the sale proceeds to generate a retirement income.

Pensions and retirement income planning

While pensions remain a cornerstone of retirement planning, and for most, a key source of income through their later lives, phasing income drawdown via different structures and sources can help take advantage of the available allowances, to provide a more tax-efficient solution overall.

ISAs

Individual Savings Accounts (ISAs) benefit from tax-free investment growth and income. If a significant ISA pot has been built up over the years, this can provide a stable stream of tax-free income throughout retirement.

General Investment Accounts

General Investment Accounts (GIAs) offer flexibility and tax-efficiency for individuals who have maximized pensions and ISAs, allowing them to draw on their investments annually up to the capital gains allowance of £3,000. This allows individuals to realise gains without incurring a CGT liability. Regular use of this allowance provides the opportunity to gradually withdraw funds tax free.

Investment bonds

These offer tax efficiency alongside potential capital growth, while allowing for tax-deferred withdrawals. Each year, investors can withdraw up to 5% of the bond’s original investment without incurring an immediate tax liability.

Family Investment Companies

Setting up Family Investment Companies (FICs) can be a tax-efficient way to retain control over wealth post sale while passing assets to the next generation. FICs allow parents to maintain control while accumulating wealth and planning for succession.

Our proposition

Providing client value is at the centre of our proposition. We offer an initial consultation to assess where we can add value, given your objectives and circumstances. This initial consultation is complimentary and includes a follow-up strategy letter that explains how your objectives could be met. Contact us on [email protected]

In February 2025, we will host CPD-accredited webinars to maximise exit value. To register your interest, please email [email protected]

This content is brought to you by Mattioli Woods.

Mattioli Woods is a provider of wealth management and employee benefit services with multiple offices throughout the UK.