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Why now is the time to focus on your own finances

Alastair Murray, Associate Partner at Haines Watts, discusses some of the current concerns when it comes to the personal tax affairs of business owners.

Over the course of 2020, business owners have been focusing their efforts on safeguarding their organisations and employees – and rightly so. The pressure on businesses has never been greater.

However, with uncertain times still ahead, it’s important to ensure that your own finances aren’t being neglected.

As such, I’ve outlined some of the main topics which are cropping up in discussions in more detail below:

Future tax rates

The Chancellor announced a raft of new COVID19 support measures in the Winter Economy Plan, but obvious questions remain ‘who will the burden fall on?’ and ‘how and when will additional tax revenues will be collected?’ to pay for the significant public sector expenditure.

When it comes to predicting the future, tax advisors sadly tend to have similar success rates as Economists and Meteorologists! At present, the smart money appears to be on increases in Capital Gains and/or Income Tax rates whilst a possible ‘one-off’ wealth tax, as has been introduced in some other European countries, should not be discounted.

Individuals should consider their personal tax structures, investments and business plans to ensure that they have a flexible plan in place in case new tax rates are introduced.

Personal Tax MOT

In seeking to raise additional revenue, we could see HMRC increasing the use of anti-avoidance measures, which have been introduced into the legislation over the last decade. Through a combination of a light touch approach and insufficient investment in resource, HMRC has not been as inquisitive as they could be into the affairs of business owners, but this is likely to change going forward.

HMRC has the powers to look back over a number of years and levy significant penalties, so consideration should be given to regular health checks ensuring that current business structures/practices remain compliant. In the current climate, it’s unlikely that HMRC will show much leniency towards errors.

Reviewing Inheritance Tax (IHT) position

Sadly, the ongoing pandemic has focused many individual’s attention on their own mortality and where their financial orders currently stand. Consideration will naturally be given to their exposure to IHT, whether steps may be taken to mitigate this through various statutory allowances and how this may be funded from a liquidity standpoint.

Changes in legislation, personal balance sheets and family circumstances may have taken place since wills/succession plans were last reviewed. Therefore, it’s important to ensure that your documents remain fluid and are updated to represent your wishes at all times.

Any consideration to IHT should be given at the same time as any legal discussions in respect of wills and powers of attorney which are the domain of a good Private Client Lawyer. Having a joined up approach from both a tax and legal perspective, will help to achieve your objectives and provide peace of mind.

What can I do now?

1. Consider current investment structures/strategy. Historic plans may no longer be fit-for-purpose and it may make sense to review them to ensure future objectives can be met.
2. Review current tax risks. Individual’s and business owners should consider their wider tax profile to ensure they minimise the risk of being placed between HMRC crosshairs, as a result of bad habits or changes in legislation/interpretations.
3. Review IHT position. Tax professionals are generally the most competent to provide advice in this area and will often work alongside other professionals to ensure future liabilities can be managed effectively.

Private client service at Haines Watts

All of these matters show that business owners need to take a holistic approach when it comes to tax planning.

By providing a bespoke financial health check, we can reveal where pinch points may arise and outline strategies to protect your wealth and meet medium/long term needs.

Get in touch to see how we can support you as we look towards 2021.

This was posted in Bdaily's Members' News section by Haines Watts .