Building Wealth Beyond Your Business | with Stuart McDonald

Most business owners spend years building their company.

Far fewer spend the same amount of time planning what happens next.

In this episode of Hoxton Life, Chris Ball sits down with Regional Director Stuart McDonald to discuss the financial planning challenges business owners face throughout their journey - from building and growing a business, to extracting wealth tax-efficiently, protecting their family, and eventually preparing for an exit.

The conversation explores why many entrepreneurs become so focused on the business itself that their personal financial planning gets pushed to the bottom of the priority list. Stuart explains why relying solely on a future business sale can be risky, and why building wealth alongside your business can create more flexibility and freedom in the future.

Chris and Stuart also discuss the emotional reality of selling a business, how to prepare years in advance for a successful exit, and the importance of ensuring your personal financial plan supports your long-term goals.

In this episode, we cover:

• Why business owners are often asset-rich but time-poor

• Tax-efficient ways to extract wealth from a business

• Pre-exit planning and preparing for a future sale

• Protecting shareholders, families and business partners

• Succession planning and passing wealth to the next generation

• Family investment companies, pensions and legacy planning

• How internationally mobile business owners can benefit from global planning

• Why selling a business is often an emotional decision, not just a financial one

Whether you're building a business, preparing for an eventual exit, or simply looking to make smarter financial decisions, this episode offers practical insights into creating a plan that works both now and in the future.

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🎧 Listen on Spotify and Apple Podcasts.
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Transcript

Why Business Owners Avoid Planning

SPEAKER_02 0:00

How many people actually think about financial planning for themselves that own businesses? Not a lot, I can tell you. So today I've got Stuart with me, and we're gonna try and help you understand how you can use financial planning as a business owner.

SPEAKER_00 0:15

Business owners form a big proportion of our clients. It's the classic example, isn't it, of us at an income rich and time poor. So there's lots of busy professionals that we deal with. Here's another way to skin the cat. Don't burn yourself out three years and then go, okay, no, I need therapy. You know, why don't we make this a bit of a longer journey? You know, Chris, from your point of view, would you want your children to be involved in financial services? Do you think it's a good business that you could pass along to them one day?

SPEAKER_02 0:45

As a business owner, there is a lot to think about in terms of your company's finances. But very few business owners think about their own financial planning and their own finances. How many people actually think about financial planning for themselves that own businesses? Not a lot, I can tell you. And what happens when they sell their business? They get a big capital event. What do you do then? What happens if you have no plans to sell your business or you can't sell your business? What should you be doing to help you get some income when you aren't in your business? What happens if you're paying loads of tax? What can you do along the way to help minimize that within your business and for you personally? So today I've got Stuart with me. Stuart's one of our regional directors at Hoxton Wealth, and we're going to try and help you understand how you can use financial planning as a business owner to combat some of these key things. So thanks very much for joining us again today, Stuart, on the Hoxton Life podcast. And today we're going to be talking about business owners. I, for one, am really looking forward to this because I'm obviously a business owner as well. So yeah, really looking forward to delving into this. And I think it's a really interesting topic. So you and I have been talking, and I'm really keen to get your take on why specifically business owners are prime candidates for financial planning or lifestyle financial planning in particular.

SPEAKER_00 2:18

Yeah, um, they uh business owners form a big proportion of our of our clients, yeah, uh small or semi-business owners. Uh it's the classic example, isn't it, of asset and income rich and time poor. So there's a lot of busy professionals that we deal with. There's uh people have busy lives, but nobody as much as an owner of a business. You know, I think we all had a collective anxiety when we saw your diary yesterday and the amount of things you've got to deal with. Um, and where do you fit not just the time but the headspace into dealing with this stuff? Um, we deal with um important things that aren't often that urgent. So that you know, the urgent will always uh you know be prioritized over the important, typically. So getting a business owner to be in the room, in the headspace, in the mindset of making these decisions well. You know, we spoke earlier about how important behaviour and psychology and all these things behind managing your money is to being successful. Um, you need the time and the space to think about that, and that's something that business owners that never really have. That's always at a premium. Um some of the most successful people in business, their personal finances are a little bit of a mess because they just haven't given it the attention or they just don't have the expertise to deal with it. Um, and then it comes to crossing that bridge again of knowing your own blind spots and being able to manage it, yeah. Which again, none of us have, whether you run a business or not. You know, we're all human beings, so we can't spot our own blind spots. Um, so I think for us, if we can get a business owner to be focused on their own personal financial planning, there's a lot of impact that we can have. Yeah, they have they're very much in control of their own destiny a lot of the time in terms of running the business. You know, it's sometimes it's feast or famine, you know, it's good and bad to it. Um, but it's often in your hands and in your capability to build your wealth, yeah, you know, which is very much what we're all about. So very, very good candidates for proper lifestyle financial planning, in my opinion.

SPEAKER_02 4:17

Yeah, there's a lot that can be done, and there's a lot that can be done personally, but also in the

Joined Up Planning And Tax Basics

SPEAKER_02 4:21

business as well. So let's talk about just some high-level things. What can be done in the business, and what kind of things can they implement personally as well that can help on both sides?

SPEAKER_00 4:30

Absolutely. And I think you've got to, although they're very separate entities, you've got to think of them as a joined up thing sometimes, uh particularly when you're planning your wealth. So controlling your income to a level, again, with tax um is really important. It pays to have a really good forward-thinking accountant, not just one who counts looking backwards. So I think that's important. It's good to work with accountants as well. So keeping your income at the levels where tax is not hideous, you know, it's difficult in this country sometimes because tax is is always a factor. Um making sure you are saving as efficiently as possible as well. So things like some low-hanging fruit for argument's sake would be making pension contributions from your company for down the road, saving for the future. Not many people know you can pay for life insurance through your company very tax efficiently, something called relevant life plans. Um, you know, so little things like that in in terms of using different allowances, maybe other family members' personal allowances to extract money from the company. If you need to take additional dividends, you could interact with other personal investment solutions that give you that tax relief on what you've just paid by taking the money out. So you have to look at it in the round. You have to say, okay, well, yes, this is my personal need and requirement, this is my business capability. If we can if we can square the circle of the two, typically you pay probably less tax and you build your wealth quicker by doing so, by removing that friction of that tax from moving from A to B, things like that.

SPEAKER_02 5:53

So, one of the problems we see of a lot of businesses is they accumulate lots of capital and they find they they find it difficult getting the money out of the business in the most tax-efficient way. So, obviously, you've got things like um dividends where you can pay out, you can obviously top up things like pension contributions. But have you seen any other more ingenious ways that you know can help people start to recoup uh money back out of the uh of the business in a tax efficient

Getting Cash Out More Wisely

SPEAKER_02 6:22

manner?

SPEAKER_00 6:22

Yeah, in terms of taking it outside of the the business wrapper, if you like, in terms of that environment, as soon as it moves from that into a personal name, you're paying personal taxes on that transaction.

SPEAKER_01 6:30

Yeah.

SPEAKER_00 6:31

So ostensibly, in a way to reduce that, there's certain things called uh venture capital trusts, VCTs as they're known, certain things called the EIS. And basically what you're doing is you're investing into smaller UK businesses. And there's a risk factor to that. They're not as diversified as your typical SP 500 funds. You know, you'll you'll have maybe 20 to 50 individual UK businesses, they're a lot smaller than those big outfits, but you get that incentive as a result. That's what the government wants. They want investment into smaller businesses because that then brings tax in other ways by employing people and corporation tax and all that kind of stuff. Um, if you're gonna leave it into in the sort of business environment, then we often work with clients around this this idea of structured. So you could you could structure a holding company inside for your trading company, so you don't want to hold all your cash potentially in your trading entity. Um well there's risks associated with it, depending on uh what business you have. So if somebody was to make a claim against your business and you've got a load of cash there, you know, you're liable to be able to you know pay this, you have means to pay it. If you move it from that environment but don't bring it into your personal name, then that risk is mitigated.

SPEAKER_01 7:34

Yeah.

SPEAKER_00 7:34

So ostensibly you you put a holding company above your trading company, and then you have other companies within that group. So effectively you can move dividends between them tax-free. Yeah. So you can move your money around. You can move your money around again. You're kind of shuffling it from A to B. You're still in the business environment, but what you could do is you could potentially set up one of those companies as an investment company.

SPEAKER_01 7:54

Yeah.

SPEAKER_00 7:55

You can invest in property, invest in um investment accounts, you can pretty much invest in whatever you want. You can treat it as a private equity vehicle, invest in other businesses. Um, you could structure that potentially as a family investment company that gives your children or other family members shares in it, and it essentially starts moving it out of your ownership into theirs over time, but still gives you complete control over the direction of those assets within it. Really useful for things like inheritance tax, for argument's sake. So if legacy is a big part of your plan and wanting to help control the future of that legacy, that might be a good way of doing it without having to take a dividend at 39% or whatever, you know, that and then try and bring it back into that world in some way, or gift it away and have to wait seven years. There's there's other ways of structuring that may be more useful for you. Yeah.

SPEAKER_02 8:41

Um, and I think it's working with people that are skilled in that area to help you understand, you know, that there is an awful lot of information that's out there. Um, there's an awful lot of so-called experts as well that are very happy to give advice, but I haven't actually walked the walk or taught the talk or done the exams um like uh most of our uh all of our wealth planners will have done. So be very careful who you take your advice from, is rule number one on that. Um, because people do realize that entrepreneurs do have a lot of money and um or can have a lot of money, and there's a lot of people out there very willing to try and exploit that. So make sure that you operate with someone who's got your best interests um at heart and you know who's typically operating on a on a on a fee basis like like we would.

Selling A Business Without Regret

SPEAKER_02 9:32

Um you know what one of the one of the areas that you know we that kind of touched on previously has been you've built up this amazing wealth. You've built up this business, it's been your blood, sweat, tears, poured into it for years. You know, you've built up this fantastic entity, and now you're exiting, like you're selling, you're getting rid of it. Um sounds like you're cutting off your arm. Um, but um And that's how it feels sometimes.

SPEAKER_00 10:01

Yeah, it's been described, it's been described as that, you know.

SPEAKER_02 10:04

Definitely it is, it's emotional, and it in a lot of a lot of the cases. I mean, look, we buy a lot of businesses of retiring financial advisors, and it's really important that they have a wire to go on to afterwards. But actually, what's it really interesting, even with financial planners, is they don't spend a lot of time thinking down the road on how to structure it. So, how important is having a good structure in place to make sure that you don't pay unnecessary tax later down the night?

SPEAKER_00 10:33

It's massive, it could be the make or break of the future of your plan. You know, if you're obviously if you're selling for uh huge amounts of money, uh the tax impact may not be make or break in terms of the life you want to live. Yeah, but most people will sell for an amount that gives them the financial freedom. And the sacrifice they've made in their sweat equity over 20 or 25 years, that's your payday, you know, in terms of doing that. They might not have had the ability along the way, or they haven't had the inclination along the way, maybe, to save in a separate way. They've banked it all on this exit. So it's fundamental, it's as efficient as it can be, and it moves into an environment that then serves them. So advice around that aspect is critical. So both financial and then personal as well. So again, back to this idea of how long how much time you have to spend in in sort of retirement or when you're not working, whatever that looks like for you. Um without that plan, you can become quite disillusioned with this next phase. You know, there's this um again, back to the biases side of things, is there's this concept called the IKEA effect where you put more value into something you've built yourself. So if you spent 25 years, blood, sweat, and tears, sleepless nights, stress and you know, sacrifice into something, you're gonna value it. Yeah, and you're gonna want it to be right. And you're gonna want the future of it to be, if it's gonna continue, you want the future of it to be bright. And you need it to be translated into something that when you look back five years when the dust has settled, or 10 years down the road, you feel happy with what what what happened and you feel comfortable in the position that you're in. So that pre-exit planning is fundamental. I mean, the there's a there's a point where it's too early, I would say, to start pre-exit planning as well, because it the numbers and the the structure it comes a bit pie in the sky. You don't really know your business. For me, I would say three years away is probably ideal. Yeah, I would say start because you can start having conversations, you can start understanding what the value of your business is. Most businesses don't change that much in that period of time, unless you're us. Yeah, um, you know, most businesses at that mature phase will be in a mode of just protecting what they have as opposed to trying to really shoot the lights out anymore. Um, so I would say that you any any longer than that, that it becomes a bit we just don't know what the future holds. Legislation changes, values change, whatever. Um but if you can hone in over, say, 36 months as a as a track and start delivering okay, deliverables and saying, okay, this is what we need, this is where we need it, um, we need payments here and there, and effectively you start to hone in on how that translates to your personal plan, then it becomes a bit more real. Yeah. You know. Um, we were saying earlier you can't really plan personally with more than 12 months. I think you need to get your ducks in a row a bit earlier than that.

SPEAKER_02 13:20

Yeah. Yeah, definitely. I mean, look, I think, like you said, that so much can change very quickly, but it's also very um relaxing, I suppose, to know that you have thought about it.

SPEAKER_01 13:35

Yeah.

SPEAKER_02 13:36

Because also, as well, like you know, we talk about there's times that it's really good to go to market with your business. It's not like long-term investing um generally in the stock market, like there's times that are really good for you to sell your business, and there's times that it's not so good to sell your business, like 22, 23, not so great. No, you probably weren't getting a great uh valuation, and you know, a lot of private equity businesses that were maybe out buying businesses during that period, pulling back now. Of course, you had a lot of pent-up demand, there's a lot of free-flowing cash, as long as Trump doesn't kind of completely sidewash everyone. But you know, you you can't plan for some of these wider economic things, so it might be that you have to go sooner, but you you want to be going off the best foot.

SPEAKER_00 14:17

You do, and and you want to try and do it like anything, you want to do it in your own terms, don't you? You want to make sure that you're yeah, it's financially right for you, but you have to be comfortable with it personally. You know, there's there's there's people in businesses we've worked with in the past where they've had a big number floated and it's hard to walk away. Yeah, uh, and personally it wasn't right for them. They were too young. They weren't early 20s, but they were they were young enough for it to be okay, there's a massive void now. You know, and it was what next? What next? And and and if those two things aren't aligned, then the pounds and pence value doesn't equate to the tangible stuff you want it to, the lifestyle value. So, again, being an outsider or without the dog in the race, really, we can sit and say, Well, okay, we can question that and we can dig a little bit deeper into that. So bringing this back around to why are they good candidates, why are business owners good candidates for financial planning? Well, there's so many moving parts, yeah, and there's so many things we can bring our experience to the table and say, Well, we've seen it happen this way, we've seen it happen this way. Consider these things, you know. So understanding how long you're gonna stay in the business once it's not yours, it's always a factor. Very few businesses sell day one, write a check and disappear. Yeah, there's always a there's always a transition period of some description, um, and getting a feel for what suits you is is really important. Um and there's obvious financial impact to that as well, there's deferred consideration of the deal.

SPEAKER_02 15:41

Yeah, no, definitely. I think it's it's factoring those different pieces, and it's also I think it helps you negoti come from a point of strength in negotiating as well. When you're you know, when you're in the midst of the deal, um you know, people can try and chip you and uh and bits and pieces, and that can be very emotional. And sometimes, you know, actually you can uh get a bit caught off guard when things like that happen. But if you've got a very clear picture of actually how much you need and why, then actually, you know, 10 million or 10.5 million doesn't matter, yeah. Well, I mean it's 500 grand, it you know it it makes a difference, but it might not matter to your overall plan. And I think people can really get lost with because they don't, they're just working off the numbers, you know, they've they they've come at me at the last minute and tried to squish me down, that's that's not on, and it's not on. But at the same time, if it's not gonna make that much, why would you kill the deal?

SPEAKER_00 16:38

Um and we talk to we talk to corporate finance partners and tax partners about this who are involved in those other professionals involved in that process. And this is where financial planning is really important because that number, anything above that number is a bonus from a real tangible what you need, life you want to live position. And if you use that as your base, anything above that, great. And if you if you finish above that, it doesn't really matter where you started. Now, it might be a bit painful, nobody wants to sell the business for less than it's worth, but these processes kick out changes along the way. You know, due diligence is a big process, yeah, and it can uncover things that change valuations. So you might start with a head-to-term signed and it gives you exclusivity to go and do due diligence for a period of time, but during that process, what you may have originally agreed on needs to change for whatever reason. So when that changes, and it often changes from a buyer saying, We're gonna give you less, as you say, um, you know, you as an individual have to be confident in what your number is and know that that is enough. Now, yeah, okay, you go back and negotiate and you find somewhere in between. Yeah, but it doesn't mean the second you move away from what we've agreed, now you can't do the deal.

SPEAKER_01 17:49

Yeah.

SPEAKER_00 17:49

And and having that confidence saves deals in this in this process. We've seen it happen. Yeah. Um, because obviously it's a as you say, it's a very emotional thing to do.

SPEAKER_02 17:58

It is, and especially when you've been working on it for so many years, like you said, and it is like your other child, um, your baby, it's uh it's it becomes a very emotional thing. Um, when a lot of people that are buying there, it's not emotional for them, they're buying a business and they're gonna do something with it and and hopefully move it on. Um, so hopefully it helps you uh hopefully it helps you come become a bit uh more rational.

Risks: Overreliance And Protection Gaps

SPEAKER_02 18:22

What are the key risks we see from a uh planning perspective for business owners?

SPEAKER_00 18:27

Yeah, I think it's um I think one of the major things I see a lot of the time is banking on this this happening, is looking at the exit as the you know the the golden egg at the end or whatever it may be and not making other provision along the way. You know, if you're starting a business, the last thing you're thinking about is selling the business most of the time.

SPEAKER_02 18:47

Um I think a lot of people actually now do stop. Yeah, and be a multi-billionaire at the end, and they're probably the ones that don't end up there, but you know, if you're enjoying it and you're passionate about it at the start, I get it.

SPEAKER_00 18:58

Yeah, yeah. And it's sometimes I think if you start with that obsession of the end in mind and not looking at the journey, I think you're you're running other risks. You run it, you know, you if you're building purely to sell, the benefits of that, of course, but you know, I think you lose something along the way with that. So I think with just banking on the exit as your way to financial independence, you're missing an opportunity along the way. You have this amazing tool here as a business to be able to generate you wealth along the way, too. Just with a few of the simple things we're talking about earlier. So extracting income tax efficiently and putting it to one side. If you don't need it now, don't take it. It's all the same principles whether you run a business or not. Live within your means, accumulate, keep saving every month, keep saving every year, you know. And and and with a business, you can do that more efficiently than than if you didn't have one. Um the other thing is, well, yes, you're building something now, yes, you're the breadwinner now, you may have enough coming in. What happens if something happens to you? What what what is going on with your family? So yeah, again, that's a huge neglected area. What are these shares worth? So you have a value. Something just happens if you die prematurely and you've got a business partner there. How does that how does that translate into anything for your family for what you're building? And there's a simple fix, and we do this all the time: some shareholder protection with the right mechanism behind the scenes to ensure every party's covered. So payment payments into trust with a cross-option agreement. So effectively, if your partner at home ends up with these shares that they're in a business they don't know how to operate, they have an opportunity and an option to just sell them directly back to the other partners in the business. The other partners have the proceeds of the cash from the insurance policies to pay for it. Most businesses aren't sitting there with 30, 50, 70% of their value in cash ready to pay in case the shareholder dies. You know, so with simple sort of tools in place like that, we can just give them that option and that peace of mind to say all along the way these shares aren't going to go to nothing.

SPEAKER_02 20:52

Yeah. Yeah, it's very, it's very, very important. And like you said, most people are starting these businesses, and the idea is to provide a legacy for their family. If that's gone along the way, then there's there's there's a big issue, and with a simple insurance policy. I say simple, but you know, for businesses that are worth tens of millions sometimes that might be seem expensive at the time, but hopefully it's the biggest waste of money you've ever you've ever had to uh pay, and it's corporation tax deductible as well, which is which is really interesting. But we've okay, which we've talked a lot about people looking who are looking to sell their businesses. There'd be people watching this go, but I've got a consulting business, I'm earning really well at the moment, you know, four or five hundred grand a year, whatever it might be. Um, but it's not a sellable asset, it's just about me. Um, like what kind of things should they be looking at?

SPEAKER_00 21:38

So it's all it's more of the same, really. You've got to make the most of this earning because when you stop, it stops. You know, there's no residual income to it, there's no value to it. It's all just your basically your time is what you're selling for. So, what I would suggest for people who are doing that is all the same principles. Make sure you're covered for you know eventualities, make sure you're extracting what you can when you can in terms of these mechanisms. Mechanisms, the UK are very good at creating uh restrictions on what you can do. So when you get to that level of personal earnings, you can't pay into pensions. So you've got to make sure that you're retaining or you're only taking out what you can to make sure you your allowances are still in place for things like pensions and all the rest of it. So all the same principles apply. What I typically find in solution in situations like that is that if when you are swapping your time for money as a consultant, it's a lot of time you're swapping. So you're trying to make as much as you can as quickly as you can, and sometimes the balance just is way off. So they're looking, okay, I can probably last for another three years before I burn out, you know, mentally. Whereas if you took if if you were able to see that you could live a great lifestyle, still accumulate wealth in a tax-efficient way, maybe you could find a balance where you could go for 10 or 15 years and do it that way. So maybe it's just a bit of reframing that we'd add as value in that situation and bringing it back in line for here's another way to skin the cat.

SPEAKER_01 22:55

Yeah.

SPEAKER_00 22:55

Don't burn yourself out three years and then go, okay, now I need therapy. You know, why don't we make this a bit of a longer journey? Um, but enjoy it a bit more.

SPEAKER_02 23:04

And that's what having that plan can help with. Yeah. You know, it's super important. Um, yeah, you know, the the other the other the other one is is like, how do I bring my kids into the business as

Legacy Planning With Children In Mind

SPEAKER_02 23:16

well? So that's another one, isn't it? You know, like we've I've built this business up, I actually want to see it pass over to my kids. How can I pass it effectively on to the next generation to run?

SPEAKER_00 23:28

Yeah. And there's look, there's loads of there's there's different ways again how of how to do that in terms of different share classes that you could bring in that don't cause immediate issues. Um there's trust that you can use, there's family investment company structures you can use to allow that transition to happen. The problem with outright gifts to children is you know loss of control completely, and obviously tax implications too. Um and sometimes as well, there's uh there's a there's an expectation that the kids come through. If you've built a if you've built a successful business, why wouldn't they want to take this? Or maybe they don't have any interest in it or whatever. And that's sometimes a conversation we end up having with multiple generations is actually I don't want it. Sell this business, get maximum value for you, and then bring me in if you know as the as the value in a more controlled way or whatever it may be, whether it's a a family investment company or or whatever. Um, Chris, from your point of view, would you would you want your children to be involved in financial services? Do you think it's a good business that they that you could pass along to them one day?

SPEAKER_02 24:29

Yeah, I mean look, I'd love for them to be part of it, but I think ultimately it's very um very specific to them, like you said, if they want to be part of it or not. At the moment, if you ask my daughter what she wants to do, it she wants to do she what she her answer would be, I want you to work for me. Um so you know, maybe that might be a thing, maybe I might do one day, I don't know. But um, but it's interesting, it's all about like tidying things up as well. I feel it's I watched a really interesting uh um a podcast recently by Bernie Eccleston, so the you know, the guy that um basically owned F1 for however many years, and he was actually talking about his car collection, which actually was like a mini business. I mean, it was a half a billion pound car collection he'd amassed over the time. And the guy Tom uh Hartley Jr. who was interviewing him actually said, Why do you um you know why why aren't you gifting these to your kids? And he's like, they don't want them. No, like I was looking at him going, Jesus, I like that definitely would not be me, I would definitely want it, but it's really understanding what the legacy plan is because if they don't want it, something happens to you, all that happens is there will be a fire sale at the end, you're not there to run it, they will be getting rid of it, they'll be divvying up the cash, and then it will be spent accordingly or not, um as the as the case may be. But it's um it's something that needs to be taken into account. It can change along the way, but you should definitely bear that in mind.

SPEAKER_00 26:02

Yeah, and and it's a question of what type of value is it. So those cars will have a massive intrinsic value to them, you know. That it's not necessarily about it's worth half a billion. It's quite useful, isn't that? But it's uh you know, it's it it's it's to him it means more than that because it's it's what they represent to him, you know, and and uh that has to be understood as well. And no more you look at a business you built from the ground up, you know. It's it I suppose we're we're saying the same sort of thing again, but that means an awful lot more than the than the number that's attached to it.

SPEAKER_02 26:32

Yeah, definitely. But also I feel that it means a lot more to maybe you as the owner than you potentially think it that it think it will actually or in actually in reality it will mean to your children.

SPEAKER_01 26:44

Yeah, yeah.

SPEAKER_02 26:45

And that's another thing that people need to take into account just because it's important to you doesn't make it important to them. No, absolutely um just because you've been frugal doesn't mean that they will be frugal, as we were saying uh earlier, you know, that can work in an inverse way as as well.

SPEAKER_00 27:00

Um and there's a challenge to it, isn't there, in terms of leaving the yeah, can I put them in a position where they don't have to do anything? And they what I'd want for them is to achieve things and feel the success of doing that themselves.

SPEAKER_02 27:12

And a lot of people who will be watching this would be interesting uh too, they're self-made, yeah, you know, and they a lot of them will probably have come from very humble beginnings and have built everything that they've got, and you know, that's make that's made them who they are. Yeah, um, so yeah, so it is is really important. So, what what are we doing? So, can you tell us a little bit more about how at Hoxton Wealth we position ourselves with business owners and the services that we can

Global Moves And Legal Foundations

SPEAKER_02 27:39

offer for them?

SPEAKER_00 27:39

Yeah, so to your earlier point, it's important that you have multiple people around the table when it comes to this stuff. So business owners will typically have their own accountant. Yeah, obviously, we have our own tax advisory, legal advisory, financial advisory in-house. Yeah, so we can cover a number of those seats and make sure that they're positioned well. Um that back to the pre-exit planning, you know, you need all those structures in place before you go and pull the trigger. Some things can't be done after, you know. So it's the worst time to do it. It's the worst time, yeah. And if your estate documents aren't in place, and again, this is all sort of disaster planning stuff, but it's necessary, it's not it's not the exciting stuff, but it's it's there to keep everything safe and keep everything going in the direction it needs to go in.

SPEAKER_01 28:18

Yeah.

SPEAKER_00 28:19

Um one of the things recently that that I've found really useful, you know, having been here now sort of seven months, um, that I've never had at my disposal anywhere else is the international side of things. Yeah. Um, people are upwardly mobile this this this um nowadays, and and effectively with wealth comes choice. Yeah. So people move around the around the world, there's a huge tax impact to doing that in certain jurisdictions. So um being positioned globally as we are means that I don't necessarily lose a relationship with a client. Yeah, I just bring a member of our team in to help me with that aspect. We've got some real live examples of me doing that in the first few months of me being here, yeah. You know, so historically, that's me. Well, it's great to work with you so far, but I'm not licensed, you know, we're not regulated there. So you know, hopefully you come back one day. Yeah. Um we don't lose clients wherever they move in the world.

SPEAKER_02 29:11

No, and it provides that continuity of relationship, like you said, that and people take a long while to build up that trust to then have to go overseas and be concerned about who you're dealing with uh when you move there is is a big challenge because you know operating in all the jurisdictions we do, I can tell you now that most of them don't operate with the same regulatory scrutiny as the UK, and a lot of the advisors, a lot of the advisors are great, but there's also a lot that aren't great, and how do you navigate that when when you move abroad? Um, you know, a real popular destination at the moment for people who are looking to exit their business is Dubai, the Middle East, we know that because um of the uh fantastic uh tax treatment that's available there with 0% on income tax and 0% on capital gains tax for people at the moment. So you're a business owner, you can move to a country like that, and you know, you can be based there or outside of it as a non-resident from the UK for five or more tax years. That's a big win in terms of tax. Big, big, big win.

SPEAKER_00 30:15

Especially when we're talking about the numbers that we we we ultimately deal with with some of these some of these businesses, they're not insignificant. The tax is eye-waltering sometimes, and you think, well, actually, would it be the worst thing in the world to live in to buy for five years? Yeah, you know, probably not, probably not, yeah.

SPEAKER_02 30:30

So probably not a bit sunshine, exactly.

SPEAKER_00 30:33

You know, these this isn't you going to you know the middle of nowhere, you're going to an incredible place, you know, in the world that's got a lot to offer. Um it just happens to have some great tax advantages.

SPEAKER_02 30:45

100%. And there's some key documents, isn't there, that we recommend people to get in place. You talked about the legal stuff, but lasting power of attorney is super, super important. Like if you were a business owner and you do not have a lasting power of attorney in place, get one like today. You know, it's so important. Um, the other one is you're obviously having things like your will in place as well. A lot of people don't realise this, which is really interesting. But if you die um and you would let's say, you know, my client Jane died, she built up a really successful business. Um, she died fairly young, uh, 60, um, and the uh you know the assets then went on to a husband, they had kids. Husband gets remarried. That will is the original will that they had, they just had a simple will, it was null and void. So actually, what ended up happening was the uh the new uh wife ended up inheriting all of Jane's business interest, um which scary but it's real life.

SPEAKER_00 31:43

It is, it is, and it's it's it's a problem of direct gifting to children as well. Yeah, you know, assets end up in divorce. There's no prenup, there's no post-nup, there's no mitigation. Because you don't really think about it, you know, you're married, you have your own children, you know, it's not one of those things anyone plans for. No, but it happens.

SPEAKER_02 32:01

But it happens, it's some insane stat like one in two people in the UK get divorced. Uh one in two marriages fail. And then I think every time you remarry the percentage chance goes up, so it becomes statistically likely that you will get divorced again. Oh, I didn't know that. Yeah, so I think it's like 50% on the first marriage, 70% on the second, and nearly 90% on the third, or something like that. It's it's insane. Um like a serial divorce. Yeah, exactly. Yeah, you know, multiple marriages. But um again, it's it's um it's it's something that can happen and it's uh it's tough to it's tough, it's a tough pill to swallow. It's even tougher when you see it happen to your kids.

SPEAKER_01 32:43

Yeah.

SPEAKER_02 32:43

Um but again, working with a financial planner to make sure that you have those things in place. That if you'd like there is nothing better than gifting with a warm hand over a cold hand. And what we mean on that is that you gift to your you gift while you're alive. Yeah. You can see the money get spent, you can see your kids get enjoyment out of it, you can see them buy a house with it, you might even be able to see another grandkid out of it because you've enabled them to do it. We've we heard about that story recently, um, where someone gave money to their children uh and then nine months later they had another grandkid because that you know the kids would suit the kids didn't have children well, another uh another child at that point because um they didn't have the money to afford it. So it gave them that, you know. Which is you know incredible.

SPEAKER_00 33:31

And it's you you think about you think about this idea of intergenerational planning, this blaster boo of money in the UK and all this kind of stuff of not talking about it. It's on a call today with um a client who's brought their 27-year-old daughter into the picture because you know he's in a position where he can and he wants to be open about where they are. Too many people are secretive, in my opinion, about their their assets. And look, everyone has their own trust relationship with everyone, yeah. But at the same time, the opportunity that it opens up for you to do. I mean, that scenario there, you can you can bring another grandchild in. I mean, amazing. Yeah, it's amazing, you know.

SPEAKER_02 34:04

But doing that in a constructive manner, yeah, so it doesn't get lost, you know, and that's not just there you go, there's a couple hundred grand or there's a million quid or whatever it is, you know, kind of go feel your boots, it's doing it in a manner that means that it follows the bloodline, um, you know, that there's various things that you can put in place because for a lot of business owners, they've worked insanely hard, they've sacrificed a hell of a lot, typically seeing children and things like that along the way as well. So it's it's really, really important to um to make it last.

Cutting Tax Along The Way

SPEAKER_02 34:36

One of the other things is that what can we do along the way to lower tax within the business? Like that's that's a key one. So we've talked about kind of gifting, uh we've talked about gifting, we've talked about putting into pensions. Yeah, that's that's a nice one because you if you if your husband and wife both work both work for the business, yeah, and you know, you can put up to a maximum of 60k, taper allowance is permitted, and things like this. That's 120 grand each into a pension, that's great. If you've got kids in the business, yeah, a couple of kids, that's another uh 120 grand each. Um, you know, and all of a sudden that starts to get pretty meaningful pretty quickly in terms of extracting. I think there's things we can obviously set up things like SaaSes uh for the for the family as well. Um, obviously, although these things are inheritance tax uh applicable now, thanks to the current Labour government, but you know, who knows on that?

SPEAKER_00 35:30

But from an income tax and ongoing perspective, things like a SaaS tool is really useful, especially if you're a physical business with a prem uh with a premises, you could buy a commercial unit with this pension. Very few people know about this. So ostensibly, instead of paying uh paying rent off to a landlord or you know, a commercial arrangement or whatever you have, that rent is rediverted back to your personal wealth in the form of a SaaS, which is just a group pension scheme for your, you know, a handful of your family members effectively you own asset in there. So they then that isn't just loss to the business, that's another form of tax or cost to the business is having that rent going out elsewhere. It can stay within it. You can reinvest in certain things within the business and get other allowances as well. Um, other expenses you can put through the business tax efficiently, things like there's the electric car scheme, which is really useful. So you can lease electric cars and there's no um there's very limited P11D taxes for you as an individual, um, and you get some relief as an expense to the business against corporation tax as well.

SPEAKER_02 36:26

Um what other things do you come across in terms of insurance, like we covered off before, that's that's a big one. Um, making sure that you utilize people within the business, um, i.e. family members, um, as making sure they're obviously doing something for the business. But if my wife's doing the books, she doesn't have to be doing them for free. Yeah. Um, you know, um, if my son is 13, 14, I have to get the minimum age you can work here. Is it for is it 13, 14? But you know, if they've got a part-time job within the business, I can but I can pay them you know through the through the business as well, and that and they're helping. Um there's various things I think business owners miss out. And what I would say is is like what I suppose what I'm trying to say is is that just by by seeing a financial planner with regards to this stuff, you're gonna get a lot more than someone saying, Oh, you need to put a couple of quid into your pension, or you need to, you know, or you know, you need to get this money out and invest it with us. Like, that's not what we're gonna do. And actually, what we really want to do is help you structure this in the most effective way. So when you do come to exit or not exit, you are financially stable.

SPEAKER_00 37:37

And I think tying that then back to a well-thought out personal financial plan gives you the motivation to do it. You know, aside from the tax saving, great, okay, tax saving, brilliant, put it in a pension, can't access it for a while. But look how it affects things later. Yeah, you know, look what it means later if it's left in this environment. You're gonna pay the tax on it, put it in your back pocket, probably spend it. If you save some of it, work which you're never gonna catch up, you know, to where you could be, which ultimately means you either have to sell the business for more, put more pressure on that, or you have to work longer. Neither of which is ideal. So taking these steps, yeah, there's a there's a benefit now, and there's a benefit later if it ties into something that's meaningful for you. So again, back to that challenge is do you have the time and headspace to think about this?

SPEAKER_01 38:21

Yeah.

SPEAKER_00 38:22

And I think you need to be in an environment, it helps getting away from your office or home or whatever, and coming to sitting in an office with us or with somebody where you can just be focused on this thing, you know, because ultimately there's always a million distractions when you run the business.

SPEAKER_02 38:35

100%. And it's mate, and it's giving yourself that headspace as well, because so many people just keep fobbing it off, fobbing it off, fobbing it off, fobbing it off. And the longer you fob it off, it becomes too late. And it's an important part, like you're clever with your business, that's why it's been successful. You need to be clever with how you, you know, jet with the funds that you generate from the business to ensure that you know they do um they get you where you want, and you're not paying unnecessary tax. That's one of business owners' biggest gripes is paying uh tax unnecessarily. Well, look, I've hope you found that useful. If you're a business owner and you want to talk to Stuart or or any of the other financial planners within our team, they've got wealth, they have a wealth of experience. Um at Hoxton Wealth, we are experts in helping people with businesses plan for their theirs and their families' futures. And if you'd like to know more, please email us at client.services at hoxtonwealth.com and we'll get in touch. I hope you found it useful. Thanks very much for your time and have a great day.