Building Wealth Beyond Your Business | with Stuart McDonald

1 - > SPEAKER_02: How many people actually think about financial 2 - > planning for themselves that own businesses? 3 - > Not a lot, I can tell you. 4 - > So today I've got Stuart with me, and we're gonna try and help 5 - > you understand how you can use financial planning as a business 6 - > owner. 7 - > SPEAKER_00: Business owners form a big proportion of our clients.

8 - > It's the classic example, isn't it, of us at an income rich and 9 - > time poor. 10 - > So there's lots of busy professionals that we deal with. 11 - > Here's another way to skin the cat. 12 - > Don't burn yourself out three years and then go, okay, no, I 13 - > need therapy.

14 - > You know, why don't we make this a bit of a longer journey? 15 - > You know, Chris, from your point of view, would you want your 16 - > children to be involved in financial services? 17 - > Do you think it's a good business that you could pass 18 - > along to them one day? 19 - > SPEAKER_02: As a business owner, there is a lot to think about in 20 - > terms of your company's finances.

21 - > But very few business owners think about their own financial 22 - > planning and their own finances. 23 - > How many people actually think about financial planning for 24 - > themselves that own businesses? 25 - > Not a lot, I can tell you. 26 - > And what happens when they sell their business?

27 - > They get a big capital event. 28 - > What do you do then? 29 - > What happens if you have no plans to sell your business or 30 - > you can't sell your business? 31 - > What should you be doing to help you get some income when you 32 - > aren't in your business?

33 - > What happens if you're paying loads of tax? 34 - > What can you do along the way to help minimize that within your 35 - > business and for you personally? 36 - > So today I've got Stuart with me. 37 - > Stuart's one of our regional directors at Hoxton Wealth, and 38 - > we're going to try and help you understand how you can use 39 - > financial planning as a business owner to combat some of these 40 - > key things.

41 - > So thanks very much for joining us again today, Stuart, on the 42 - > Hoxton Life podcast. 43 - > And today we're going to be talking about business owners. 44 - > I, for one, am really looking forward to this because I'm 45 - > obviously a business owner as well. 46 - > So yeah, really looking forward to delving into this.

47 - > And I think it's a really interesting topic. 48 - > So you and I have been talking, and I'm really keen to get your 49 - > take on why specifically business owners are prime 50 - > candidates for financial planning or lifestyle financial 51 - > planning in particular. 52 - > SPEAKER_00: Yeah, um, they uh business owners form a big 53 - > proportion of our of our clients, yeah, uh small or 54 - > semi-business owners. 55 - > Uh it's the classic example, isn't it, of asset and income 56 - > rich and time poor.

57 - > So there's a lot of busy professionals that we deal with. 58 - > There's uh people have busy lives, but nobody as much as an 59 - > owner of a business. 60 - > You know, I think we all had a collective anxiety when we saw 61 - > your diary yesterday and the amount of things you've got to 62 - > deal with. 63 - > Um, and where do you fit not just the time but the headspace 64 - > into dealing with this stuff?

65 - > Um, we deal with um important things that aren't often that 66 - > urgent. 67 - > So that you know, the urgent will always uh you know be 68 - > prioritized over the important, typically. 69 - > So getting a business owner to be in the room, in the 70 - > headspace, in the mindset of making these decisions well. 71 - > You know, we spoke earlier about how important behaviour and 72 - > psychology and all these things behind managing your money is to 73 - > being successful.

74 - > Um, you need the time and the space to think about that, and 75 - > that's something that business owners that never really have. 76 - > That's always at a premium. 77 - > Um some of the most successful people in business, their 78 - > personal finances are a little bit of a mess because they just 79 - > haven't given it the attention or they just don't have the 80 - > expertise to deal with it. 81 - > Um, and then it comes to crossing that bridge again of 82 - > knowing your own blind spots and being able to manage it, yeah.

83 - > Which again, none of us have, whether you run a business or 84 - > not. 85 - > You know, we're all human beings, so we can't spot our own 86 - > blind spots. 87 - > Um, so I think for us, if we can get a business owner to be 88 - > focused on their own personal financial planning, there's a 89 - > lot of impact that we can have. 90 - > Yeah, they have they're very much in control of their own 91 - > destiny a lot of the time in terms of running the business.

92 - > You know, it's sometimes it's feast or famine, you know, it's 93 - > good and bad to it. 94 - > Um, but it's often in your hands and in your capability to build 95 - > your wealth, yeah, you know, which is very much what we're 96 - > all about. 97 - > So very, very good candidates for proper lifestyle financial 98 - > planning, in my opinion. 99 - > SPEAKER_02: Yeah, there's a lot that can be done, and there's a 100 - > lot that can be done personally, but also in the business as 101 - > well.

102 - > So let's talk about just some high-level things. 103 - > What can be done in the business, and what kind of 104 - > things can they implement personally as well that can help 105 - > on both sides? 106 - > SPEAKER_00: Absolutely. 107 - > And I think you've got to, although they're very separate 108 - > entities, you've got to think of them as a joined up thing 109 - > sometimes, uh particularly when you're planning your wealth.

110 - > So controlling your income to a level, again, with tax um is 111 - > really important. 112 - > It pays to have a really good forward-thinking accountant, not 113 - > just one who counts looking backwards. 114 - > So I think that's important. 115 - > It's good to work with accountants as well.

116 - > So keeping your income at the levels where tax is not hideous, 117 - > you know, it's difficult in this country sometimes because tax is 118 - > is always a factor. 119 - > Um making sure you are saving as efficiently as possible as well. 120 - > So things like some low-hanging fruit for argument's sake would 121 - > be making pension contributions from your company for down the 122 - > road, saving for the future. 123 - > Not many people know you can pay for life insurance through your 124 - > company very tax efficiently, something called relevant life 125 - > plans.

126 - > Um, you know, so little things like that in in terms of using 127 - > different allowances, maybe other family members' personal 128 - > allowances to extract money from the company. 129 - > If you need to take additional dividends, you could interact 130 - > with other personal investment solutions that give you that tax 131 - > relief on what you've just paid by taking the money out. 132 - > So you have to look at it in the round. 133 - > You have to say, okay, well, yes, this is my personal need 134 - > and requirement, this is my business capability.

135 - > If we can if we can square the circle of the two, typically you 136 - > pay probably less tax and you build your wealth quicker by 137 - > doing so, by removing that friction of that tax from moving 138 - > from A to B, things like that. 139 - > SPEAKER_02: So, one of the problems we see of a lot of 140 - > businesses is they accumulate lots of capital and they find 141 - > they they find it difficult getting the money out of the 142 - > business in the most tax-efficient way.

143 - > So, obviously, you've got things like um dividends where you can 144 - > pay out, you can obviously top up things like pension 145 - > contributions. 146 - > But have you seen any other more ingenious ways that you know can 147 - > help people start to recoup uh money back out of the uh of the 148 - > business in a tax efficient manner? 149 - > SPEAKER_00: Yeah, in terms of taking it outside of the the 150 - > business wrapper, if you like, in terms of that environment, as 151 - > soon as it moves from that into a personal name, you're paying 152 - > personal taxes on that transaction.

153 - > SPEAKER_01: Yeah. 154 - > SPEAKER_00: So ostensibly, in a way to reduce that, there's 155 - > certain things called uh venture capital trusts, VCTs as they're 156 - > known, certain things called the EIS. 157 - > And basically what you're doing is you're investing into smaller 158 - > UK businesses. 159 - > And there's a risk factor to that.

160 - > They're not as diversified as your typical SP 500 funds. 161 - > You know, you'll you'll have maybe 20 to 50 individual UK 162 - > businesses, they're a lot smaller than those big outfits, 163 - > but you get that incentive as a result. 164 - > That's what the government wants. 165 - > They want investment into smaller businesses because that 166 - > then brings tax in other ways by employing people and corporation 167 - > tax and all that kind of stuff.

168 - > Um, if you're gonna leave it into in the sort of business 169 - > environment, then we often work with clients around this this 170 - > idea of structured. 171 - > So you could you could structure a holding company inside for 172 - > your trading company, so you don't want to hold all your cash 173 - > potentially in your trading entity. 174 - > Um well there's risks associated with it, depending on uh what 175 - > business you have. 176 - > So if somebody was to make a claim against your business and 177 - > you've got a load of cash there, you know, you're liable to be 178 - > able to you know pay this, you have means to pay it.

179 - > If you move it from that environment but don't bring it 180 - > into your personal name, then that risk is mitigated. 181 - > SPEAKER_01: Yeah. 182 - > SPEAKER_00: So ostensibly you you put a holding company above 183 - > your trading company, and then you have other companies within 184 - > that group. 185 - > So effectively you can move dividends between them tax-free.

186 - > Yeah. 187 - > So you can move your money around. 188 - > You can move your money around again. 189 - > You're kind of shuffling it from A to B.

190 - > You're still in the business environment, but what you could 191 - > do is you could potentially set up one of those companies as an 192 - > investment company. 193 - > SPEAKER_01: Yeah. 194 - > SPEAKER_00: You can invest in property, invest in um 195 - > investment accounts, you can pretty much invest in whatever 196 - > you want. 197 - > You can treat it as a private equity vehicle, invest in other 198 - > businesses.

199 - > Um, you could structure that potentially as a family 200 - > investment company that gives your children or other family 201 - > members shares in it, and it essentially starts moving it out 202 - > of your ownership into theirs over time, but still gives you 203 - > complete control over the direction of those assets within 204 - > it. 205 - > Really useful for things like inheritance tax, for argument's 206 - > sake. 207 - > So if legacy is a big part of your plan and wanting to help 208 - > control the future of that legacy, that might be a good way 209 - > of doing it without having to take a dividend at 39% or 210 - > whatever, you know, that and then try and bring it back into 211 - > that world in some way, or gift it away and have to wait seven 212 - > years.

213 - > There's there's other ways of structuring that may be more 214 - > useful for you. 215 - > Yeah. 216 - > SPEAKER_02: Um, and I think it's working with people that are 217 - > skilled in that area to help you understand, you know, that there 218 - > is an awful lot of information that's out there. 219 - > Um, there's an awful lot of so-called experts as well that 220 - > are very happy to give advice, but I haven't actually walked 221 - > the walk or taught the talk or done the exams um like uh most 222 - > of our uh all of our wealth planners will have done.

223 - > So be very careful who you take your advice from, is rule number 224 - > one on that. 225 - > Um, because people do realize that entrepreneurs do have a lot 226 - > of money and um or can have a lot of money, and there's a lot 227 - > of people out there very willing to try and exploit that. 228 - > So make sure that you operate with someone who's got your best 229 - > interests um at heart and you know who's typically operating 230 - > on a on a on a fee basis like like we would.

231 - > Um you know what one of the one of the areas that you know we 232 - > that kind of touched on previously has been you've built 233 - > up this amazing wealth. 234 - > You've built up this business, it's been your blood, sweat, 235 - > tears, poured into it for years. 236 - > You know, you've built up this fantastic entity, and now you're 237 - > exiting, like you're selling, you're getting rid of it. 238 - > Um sounds like you're cutting off your arm.

239 - > Um, but um And that's how it feels sometimes. 240 - > SPEAKER_00: Yeah, it's been described, it's been described 241 - > as that, you know. 242 - > SPEAKER_02: Definitely it is, it's emotional, and it in a lot 243 - > of a lot of the cases. 244 - > I mean, look, we buy a lot of businesses of retiring financial 245 - > advisors, and it's really important that they have a wire 246 - > to go on to afterwards.

247 - > But actually, what's it really interesting, even with financial 248 - > planners, is they don't spend a lot of time thinking down the 249 - > road on how to structure it. 250 - > So, how important is having a good structure in place to make 251 - > sure that you don't pay unnecessary tax later down the 252 - > night? 253 - > SPEAKER_00: It's massive, it could be the make or break of 254 - > the future of your plan. 255 - > You know, if you're obviously if you're selling for uh huge 256 - > amounts of money, uh the tax impact may not be make or break 257 - > in terms of the life you want to live.

258 - > Yeah, but most people will sell for an amount that gives them 259 - > the financial freedom. 260 - > And the sacrifice they've made in their sweat equity over 20 or 261 - > 25 years, that's your payday, you know, in terms of doing 262 - > that. 263 - > They might not have had the ability along the way, or they 264 - > haven't had the inclination along the way, maybe, to save in 265 - > a separate way. 266 - > They've banked it all on this exit.

267 - > So it's fundamental, it's as efficient as it can be, and it 268 - > moves into an environment that then serves them. 269 - > So advice around that aspect is critical. 270 - > So both financial and then personal as well. 271 - > So again, back to this idea of how long how much time you have 272 - > to spend in in sort of retirement or when you're not 273 - > working, whatever that looks like for you.

274 - > Um without that plan, you can become quite disillusioned with 275 - > this next phase. 276 - > You know, there's this um again, back to the biases side of 277 - > things, is there's this concept called the IKEA effect where you 278 - > put more value into something you've built yourself. 279 - > So if you spent 25 years, blood, sweat, and tears, sleepless 280 - > nights, stress and you know, sacrifice into something, you're 281 - > gonna value it. 282 - > Yeah, and you're gonna want it to be right.

283 - > And you're gonna want the future of it to be, if it's gonna 284 - > continue, you want the future of it to be bright. 285 - > And you need it to be translated into something that when you 286 - > look back five years when the dust has settled, or 10 years 287 - > down the road, you feel happy with what what what happened and 288 - > you feel comfortable in the position that you're in. 289 - > So that pre-exit planning is fundamental. 290 - > I mean, the there's a there's a point where it's too early, I 291 - > would say, to start pre-exit planning as well, because it the 292 - > numbers and the the structure it comes a bit pie in the sky.

293 - > You don't really know your business. 294 - > For me, I would say three years away is probably ideal. 295 - > Yeah, I would say start because you can start having 296 - > conversations, you can start understanding what the value of 297 - > your business is. 298 - > Most businesses don't change that much in that period of 299 - > time, unless you're us.

300 - > Yeah, um, you know, most businesses at that mature phase 301 - > will be in a mode of just protecting what they have as 302 - > opposed to trying to really shoot the lights out anymore. 303 - > Um, so I would say that you any any longer than that, that it 304 - > becomes a bit we just don't know what the future holds. 305 - > Legislation changes, values change, whatever. 306 - > Um but if you can hone in over, say, 36 months as a as a track 307 - > and start delivering okay, deliverables and saying, okay, 308 - > this is what we need, this is where we need it, um, we need 309 - > payments here and there, and effectively you start to hone in 310 - > on how that translates to your personal plan, then it becomes a 311 - > bit more real.

312 - > Yeah. 313 - > You know. 314 - > Um, we were saying earlier you can't really plan personally 315 - > with more than 12 months. 316 - > I think you need to get your ducks in a row a bit earlier 317 - > than that.

318 - > SPEAKER_02: Yeah. 319 - > Yeah, definitely. 320 - > I mean, look, I think, like you said, that so much can change 321 - > very quickly, but it's also very um relaxing, I suppose, to know 322 - > that you have thought about it. 323 - > SPEAKER_01: Yeah.

324 - > SPEAKER_02: Because also, as well, like you know, we talk 325 - > about there's times that it's really good to go to market with 326 - > your business. 327 - > It's not like long-term investing um generally in the 328 - > stock market, like there's times that are really good for you to 329 - > sell your business, and there's times that it's not so good to 330 - > sell your business, like 22, 23, not so great. 331 - > No, you probably weren't getting a great uh valuation, and you 332 - > know, a lot of private equity businesses that were maybe out 333 - > buying businesses during that period, pulling back now.

334 - > Of course, you had a lot of pent-up demand, there's a lot of 335 - > free-flowing cash, as long as Trump doesn't kind of completely 336 - > sidewash everyone. 337 - > But you know, you you can't plan for some of these wider economic 338 - > things, so it might be that you have to go sooner, but you you 339 - > want to be going off the best foot. 340 - > SPEAKER_00: You do, and and you want to try and do it like 341 - > anything, you want to do it in your own terms, don't you?

342 - > You want to make sure that you're yeah, it's financially 343 - > right for you, but you have to be comfortable with it 344 - > personally. 345 - > You know, there's there's there's people in businesses 346 - > we've worked with in the past where they've had a big number 347 - > floated and it's hard to walk away. 348 - > Yeah, uh, and personally it wasn't right for them. 349 - > They were too young.

350 - > They weren't early 20s, but they were they were young enough for 351 - > it to be okay, there's a massive void now. 352 - > You know, and it was what next? 353 - > What next? 354 - > And and and if those two things aren't aligned, then the pounds 355 - > and pence value doesn't equate to the tangible stuff you want 356 - > it to, the lifestyle value.

357 - > So, again, being an outsider or without the dog in the race, 358 - > really, we can sit and say, Well, okay, we can question that 359 - > and we can dig a little bit deeper into that. 360 - > So bringing this back around to why are they good candidates, 361 - > why are business owners good candidates for financial 362 - > planning? 363 - > Well, there's so many moving parts, yeah, and there's so many 364 - > things we can bring our experience to the table and say, 365 - > Well, we've seen it happen this way, we've seen it happen this 366 - > way.

367 - > Consider these things, you know. 368 - > So understanding how long you're gonna stay in the business once 369 - > it's not yours, it's always a factor. 370 - > Very few businesses sell day one, write a check and 371 - > disappear. 372 - > Yeah, there's always a there's always a transition period of 373 - > some description, um, and getting a feel for what suits 374 - > you is is really important.

375 - > Um and there's obvious financial impact to that as well, there's 376 - > deferred consideration of the deal. 377 - > SPEAKER_02: Yeah, no, definitely. 378 - > I think it's it's factoring those different pieces, and it's 379 - > also I think it helps you negoti come from a point of strength in 380 - > negotiating as well. 381 - > When you're you know, when you're in the midst of the deal, 382 - > um you know, people can try and chip you and uh and bits and 383 - > pieces, and that can be very emotional.

384 - > And sometimes, you know, actually you can uh get a bit 385 - > caught off guard when things like that happen. 386 - > But if you've got a very clear picture of actually how much you 387 - > need and why, then actually, you know, 10 million or 10.5 million 388 - > doesn't matter, yeah. 389 - > Well, I mean it's 500 grand, it you know it it makes a 390 - > difference, but it might not matter to your overall plan.

391 - > And I think people can really get lost with because they 392 - > don't, they're just working off the numbers, you know, they've 393 - > they they've come at me at the last minute and tried to squish 394 - > me down, that's that's not on, and it's not on. 395 - > But at the same time, if it's not gonna make that much, why 396 - > would you kill the deal? 397 - > SPEAKER_00: Um and we talk to we talk to corporate finance 398 - > partners and tax partners about this who are involved in those 399 - > other professionals involved in that process.

400 - > And this is where financial planning is really important 401 - > because that number, anything above that number is a bonus 402 - > from a real tangible what you need, life you want to live 403 - > position. 404 - > And if you use that as your base, anything above that, 405 - > great. 406 - > And if you if you finish above that, it doesn't really matter 407 - > where you started. 408 - > Now, it might be a bit painful, nobody wants to sell the 409 - > business for less than it's worth, but these processes kick 410 - > out changes along the way.

411 - > You know, due diligence is a big process, yeah, and it can 412 - > uncover things that change valuations. 413 - > So you might start with a head-to-term signed and it gives 414 - > you exclusivity to go and do due diligence for a period of time, 415 - > but during that process, what you may have originally agreed 416 - > on needs to change for whatever reason. 417 - > So when that changes, and it often changes from a buyer 418 - > saying, We're gonna give you less, as you say, um, you know, 419 - > you as an individual have to be confident in what your number is 420 - > and know that that is enough.

421 - > Now, yeah, okay, you go back and negotiate and you find somewhere 422 - > in between. 423 - > Yeah, but it doesn't mean the second you move away from what 424 - > we've agreed, now you can't do the deal. 425 - > SPEAKER_01: Yeah. 426 - > SPEAKER_00: And and having that confidence saves deals in this 427 - > in this process.

428 - > We've seen it happen. 429 - > Yeah. 430 - > Um, because obviously it's a as you say, it's a very emotional 431 - > thing to do. 432 - > SPEAKER_02: It is, and especially when you've been 433 - > working on it for so many years, like you said, and it is like 434 - > your other child, um, your baby, it's uh it's it becomes a very 435 - > emotional thing.

436 - > Um, when a lot of people that are buying there, it's not 437 - > emotional for them, they're buying a business and they're 438 - > gonna do something with it and and hopefully move it on. 439 - > Um, so hopefully it helps you uh hopefully it helps you come 440 - > become a bit uh more rational. 441 - > What are the key risks we see from a uh planning perspective 442 - > for business owners? 443 - > SPEAKER_00: Yeah, I think it's um I think one of the major 444 - > things I see a lot of the time is banking on this this 445 - > happening, is looking at the exit as the you know the the 446 - > golden egg at the end or whatever it may be and not 447 - > making other provision along the way.

448 - > You know, if you're starting a business, the last thing you're 449 - > thinking about is selling the business most of the time. 450 - > SPEAKER_02: Um I think a lot of people actually now do stop. 451 - > Yeah, and be a multi-billionaire at the end, and they're probably 452 - > the ones that don't end up there, but you know, if you're 453 - > enjoying it and you're passionate about it at the 454 - > start, I get it. 455 - > SPEAKER_00: Yeah, yeah.

456 - > And it's sometimes I think if you start with that obsession of 457 - > the end in mind and not looking at the journey, I think you're 458 - > you're running other risks. 459 - > You run it, you know, you if you're building purely to sell, 460 - > the benefits of that, of course, but you know, I think you lose 461 - > something along the way with that. 462 - > So I think with just banking on the exit as your way to 463 - > financial independence, you're missing an opportunity along the 464 - > way.

465 - > You have this amazing tool here as a business to be able to 466 - > generate you wealth along the way, too. 467 - > Just with a few of the simple things we're talking about 468 - > earlier. 469 - > So extracting income tax efficiently and putting it to 470 - > one side. 471 - > If you don't need it now, don't take it.

472 - > It's all the same principles whether you run a business or 473 - > not. 474 - > Live within your means, accumulate, keep saving every 475 - > month, keep saving every year, you know. 476 - > And and and with a business, you can do that more efficiently 477 - > than than if you didn't have one. 478 - > Um the other thing is, well, yes, you're building something 479 - > now, yes, you're the breadwinner now, you may have enough coming 480 - > in.

481 - > What happens if something happens to you? 482 - > What what what is going on with your family? 483 - > So yeah, again, that's a huge neglected area. 484 - > What are these shares worth?

485 - > So you have a value. 486 - > Something just happens if you die prematurely and you've got a 487 - > business partner there. 488 - > How does that how does that translate into anything for your 489 - > family for what you're building? 490 - > And there's a simple fix, and we do this all the time: some 491 - > shareholder protection with the right mechanism behind the 492 - > scenes to ensure every party's covered.

493 - > So payment payments into trust with a cross-option agreement. 494 - > So effectively, if your partner at home ends up with these 495 - > shares that they're in a business they don't know how to 496 - > operate, they have an opportunity and an option to 497 - > just sell them directly back to the other partners in the 498 - > business. 499 - > The other partners have the proceeds of the cash from the 500 - > insurance policies to pay for it. 501 - > Most businesses aren't sitting there with 30, 50, 70% of their 502 - > value in cash ready to pay in case the shareholder dies.

503 - > You know, so with simple sort of tools in place like that, we can 504 - > just give them that option and that peace of mind to say all 505 - > along the way these shares aren't going to go to nothing. 506 - > SPEAKER_02: Yeah. 507 - > Yeah, it's very, it's very, very important. 508 - > And like you said, most people are starting these businesses, 509 - > and the idea is to provide a legacy for their family.

510 - > If that's gone along the way, then there's there's there's a 511 - > big issue, and with a simple insurance policy. 512 - > I say simple, but you know, for businesses that are worth tens 513 - > of millions sometimes that might be seem expensive at the time, 514 - > but hopefully it's the biggest waste of money you've ever 515 - > you've ever had to uh pay, and it's corporation tax deductible 516 - > as well, which is which is really interesting. 517 - > But we've okay, which we've talked a lot about people 518 - > looking who are looking to sell their businesses.

519 - > There'd be people watching this go, but I've got a consulting 520 - > business, I'm earning really well at the moment, you know, 521 - > four or five hundred grand a year, whatever it might be. 522 - > Um, but it's not a sellable asset, it's just about me. 523 - > Um, like what kind of things should they be looking at? 524 - > SPEAKER_00: So it's all it's more of the same, really.

525 - > You've got to make the most of this earning because when you 526 - > stop, it stops. 527 - > You know, there's no residual income to it, there's no value 528 - > to it. 529 - > It's all just your basically your time is what you're selling 530 - > for. 531 - > So, what I would suggest for people who are doing that is all 532 - > the same principles.

533 - > Make sure you're covered for you know eventualities, make sure 534 - > you're extracting what you can when you can in terms of these 535 - > mechanisms. 536 - > Mechanisms, the UK are very good at creating uh restrictions on 537 - > what you can do. 538 - > So when you get to that level of personal earnings, you can't pay 539 - > into pensions. 540 - > So you've got to make sure that you're retaining or you're only 541 - > taking out what you can to make sure you your allowances are 542 - > still in place for things like pensions and all the rest of it.

543 - > So all the same principles apply. 544 - > What I typically find in solution in situations like that 545 - > is that if when you are swapping your time for money as a 546 - > consultant, it's a lot of time you're swapping. 547 - > So you're trying to make as much as you can as quickly as you 548 - > can, and sometimes the balance just is way off. 549 - > So they're looking, okay, I can probably last for another three 550 - > years before I burn out, you know, mentally.

551 - > Whereas if you took if if you were able to see that you could 552 - > live a great lifestyle, still accumulate wealth in a 553 - > tax-efficient way, maybe you could find a balance where you 554 - > could go for 10 or 15 years and do it that way. 555 - > So maybe it's just a bit of reframing that we'd add as value 556 - > in that situation and bringing it back in line for here's 557 - > another way to skin the cat. 558 - > SPEAKER_01: Yeah. 559 - > SPEAKER_00: Don't burn yourself out three years and then go, 560 - > okay, now I need therapy.

561 - > You know, why don't we make this a bit of a longer journey? 562 - > Um, but enjoy it a bit more. 563 - > SPEAKER_02: And that's what having that plan can help with. 564 - > Yeah.

565 - > You know, it's super important. 566 - > Um, yeah, you know, the the other the other the other one is 567 - > is like, how do I bring my kids into the business as well? 568 - > So that's another one, isn't it? 569 - > You know, like we've I've built this business up, I actually 570 - > want to see it pass over to my kids.

571 - > How can I pass it effectively on to the next generation to run? 572 - > SPEAKER_00: Yeah. 573 - > And there's look, there's loads of there's there's different 574 - > ways again how of how to do that in terms of different share 575 - > classes that you could bring in that don't cause immediate 576 - > issues. 577 - > Um there's trust that you can use, there's family investment 578 - > company structures you can use to allow that transition to 579 - > happen.

580 - > The problem with outright gifts to children is you know loss of 581 - > control completely, and obviously tax implications too. 582 - > Um and sometimes as well, there's uh there's a there's an 583 - > expectation that the kids come through. 584 - > If you've built a if you've built a successful business, why 585 - > wouldn't they want to take this? 586 - > Or maybe they don't have any interest in it or whatever.

587 - > And that's sometimes a conversation we end up having 588 - > with multiple generations is actually I don't want it. 589 - > Sell this business, get maximum value for you, and then bring me 590 - > in if you know as the as the value in a more controlled way 591 - > or whatever it may be, whether it's a a family investment 592 - > company or or whatever. 593 - > Um, Chris, from your point of view, would you would you want 594 - > your children to be involved in financial services?

595 - > Do you think it's a good business that they that you 596 - > could pass along to them one day? 597 - > SPEAKER_02: Yeah, I mean look, I'd love for them to be part of 598 - > it, but I think ultimately it's very um very specific to them, 599 - > like you said, if they want to be part of it or not. 600 - > At the moment, if you ask my daughter what she wants to do, 601 - > it she wants to do she what she her answer would be, I want you 602 - > to work for me. 603 - > Um so you know, maybe that might be a thing, maybe I might do one 604 - > day, I don't know.

605 - > But um, but it's interesting, it's all about like tidying 606 - > things up as well. 607 - > I feel it's I watched a really interesting uh um a podcast 608 - > recently by Bernie Eccleston, so the you know, the guy that um 609 - > basically owned F1 for however many years, and he was actually 610 - > talking about his car collection, which actually was 611 - > like a mini business. 612 - > I mean, it was a half a billion pound car collection he'd 613 - > amassed over the time.

614 - > And the guy Tom uh Hartley Jr. 615 - > who was interviewing him actually said, Why do you um you 616 - > know why why aren't you gifting these to your kids? 617 - > And he's like, they don't want them. 618 - > No, like I was looking at him going, Jesus, I like that 619 - > definitely would not be me, I would definitely want it, but 620 - > it's really understanding what the legacy plan is because if 621 - > they don't want it, something happens to you, all that happens 622 - > is there will be a fire sale at the end, you're not there to run 623 - > it, they will be getting rid of it, they'll be divvying up the 624 - > cash, and then it will be spent accordingly or not, um as the as 625 - > the case may be.

626 - > But it's um it's something that needs to be taken into account. 627 - > It can change along the way, but you should definitely bear that 628 - > in mind. 629 - > SPEAKER_00: Yeah, and and it's a question of what type of value 630 - > is it. 631 - > So those cars will have a massive intrinsic value to them, 632 - > you know.

633 - > That it's not necessarily about it's worth half a billion. 634 - > It's quite useful, isn't that? 635 - > But it's uh you know, it's it it's it's to him it means more 636 - > than that because it's it's what they represent to him, you know, 637 - > and and uh that has to be understood as well. 638 - > And no more you look at a business you built from the 639 - > ground up, you know.

640 - > It's it I suppose we're we're saying the same sort of thing 641 - > again, but that means an awful lot more than the than the 642 - > number that's attached to it. 643 - > SPEAKER_02: Yeah, definitely. 644 - > But also I feel that it means a lot more to maybe you as the 645 - > owner than you potentially think it that it think it will 646 - > actually or in actually in reality it will mean to your 647 - > children. 648 - > SPEAKER_01: Yeah, yeah.

649 - > SPEAKER_02: And that's another thing that people need to take 650 - > into account just because it's important to you doesn't make it 651 - > important to them. 652 - > No, absolutely um just because you've been frugal doesn't mean 653 - > that they will be frugal, as we were saying uh earlier, you 654 - > know, that can work in an inverse way as as well. 655 - > SPEAKER_00: Um and there's a challenge to it, isn't there, in 656 - > terms of leaving the yeah, can I put them in a position where 657 - > they don't have to do anything?

658 - > And they what I'd want for them is to achieve things and feel 659 - > the success of doing that themselves. 660 - > SPEAKER_02: And a lot of people who will be watching this would 661 - > be interesting uh too, they're self-made, yeah, you know, and 662 - > they a lot of them will probably have come from very humble 663 - > beginnings and have built everything that they've got, and 664 - > you know, that's make that's made them who they are. 665 - > Yeah, um, so yeah, so it is is really important.

666 - > So, what what are we doing? 667 - > So, can you tell us a little bit more about how at Hoxton Wealth 668 - > we position ourselves with business owners and the services 669 - > that we can offer for them? 670 - > SPEAKER_00: Yeah, so to your earlier point, it's important 671 - > that you have multiple people around the table when it comes 672 - > to this stuff. 673 - > So business owners will typically have their own 674 - > accountant.

675 - > Yeah, obviously, we have our own tax advisory, legal advisory, 676 - > financial advisory in-house. 677 - > Yeah, so we can cover a number of those seats and make sure 678 - > that they're positioned well. 679 - > Um that back to the pre-exit planning, you know, you need all 680 - > those structures in place before you go and pull the trigger. 681 - > Some things can't be done after, you know.

682 - > So it's the worst time to do it. 683 - > It's the worst time, yeah. 684 - > And if your estate documents aren't in place, and again, this 685 - > is all sort of disaster planning stuff, but it's necessary, it's 686 - > not it's not the exciting stuff, but it's it's there to keep 687 - > everything safe and keep everything going in the 688 - > direction it needs to go in. 689 - > SPEAKER_01: Yeah.

690 - > SPEAKER_00: Um one of the things recently that that I've found 691 - > really useful, you know, having been here now sort of seven 692 - > months, um, that I've never had at my disposal anywhere else is 693 - > the international side of things. 694 - > Yeah. 695 - > Um, people are upwardly mobile this this this um nowadays, and 696 - > and effectively with wealth comes choice. 697 - > Yeah.

698 - > So people move around the around the world, there's a huge tax 699 - > impact to doing that in certain jurisdictions. 700 - > So um being positioned globally as we are means that I don't 701 - > necessarily lose a relationship with a client. 702 - > Yeah, I just bring a member of our team in to help me with that 703 - > aspect. 704 - > We've got some real live examples of me doing that in the 705 - > first few months of me being here, yeah.

706 - > You know, so historically, that's me. 707 - > Well, it's great to work with you so far, but I'm not 708 - > licensed, you know, we're not regulated there. 709 - > So you know, hopefully you come back one day. 710 - > Yeah.

711 - > Um we don't lose clients wherever they move in the world. 712 - > SPEAKER_02: No, and it provides that continuity of relationship, 713 - > like you said, that and people take a long while to build up 714 - > that trust to then have to go overseas and be concerned about 715 - > who you're dealing with uh when you move there is is a big 716 - > challenge because you know operating in all the 717 - > jurisdictions we do, I can tell you now that most of them don't 718 - > operate with the same regulatory scrutiny as the UK, and a lot of 719 - > the advisors, a lot of the advisors are great, but there's 720 - > also a lot that aren't great, and how do you navigate that 721 - > when when you move abroad?

722 - > Um, you know, a real popular destination at the moment for 723 - > people who are looking to exit their business is Dubai, the 724 - > Middle East, we know that because um of the uh fantastic 725 - > uh tax treatment that's available there with 0% on 726 - > income tax and 0% on capital gains tax for people at the 727 - > moment. 728 - > So you're a business owner, you can move to a country like that, 729 - > and you know, you can be based there or outside of it as a 730 - > non-resident from the UK for five or more tax years.

731 - > That's a big win in terms of tax. 732 - > Big, big, big win. 733 - > SPEAKER_00: Especially when we're talking about the numbers 734 - > that we we we ultimately deal with with some of these some of 735 - > these businesses, they're not insignificant. 736 - > The tax is eye-waltering sometimes, and you think, well, 737 - > actually, would it be the worst thing in the world to live in to 738 - > buy for five years?

739 - > Yeah, you know, probably not, probably not, yeah. 740 - > SPEAKER_02: So probably not a bit sunshine, exactly. 741 - > SPEAKER_00: You know, these this isn't you going to you know the 742 - > middle of nowhere, you're going to an incredible place, you 743 - > know, in the world that's got a lot to offer. 744 - > Um it just happens to have some great tax advantages.

745 - > SPEAKER_02: 100%. 746 - > And there's some key documents, isn't there, that we recommend 747 - > people to get in place. 748 - > You talked about the legal stuff, but lasting power of 749 - > attorney is super, super important. 750 - > Like if you were a business owner and you do not have a 751 - > lasting power of attorney in place, get one like today.

752 - > You know, it's so important. 753 - > Um, the other one is you're obviously having things like 754 - > your will in place as well. 755 - > A lot of people don't realise this, which is really 756 - > interesting. 757 - > But if you die um and you would let's say, you know, my client 758 - > Jane died, she built up a really successful business.

759 - > Um, she died fairly young, uh, 60, um, and the uh you know the 760 - > assets then went on to a husband, they had kids. 761 - > Husband gets remarried. 762 - > That will is the original will that they had, they just had a 763 - > simple will, it was null and void. 764 - > So actually, what ended up happening was the uh the new uh 765 - > wife ended up inheriting all of Jane's business interest, um 766 - > which scary but it's real life.

767 - > SPEAKER_00: It is, it is, and it's it's it's a problem of 768 - > direct gifting to children as well. 769 - > Yeah, you know, assets end up in divorce. 770 - > There's no prenup, there's no post-nup, there's no mitigation. 771 - > Because you don't really think about it, you know, you're 772 - > married, you have your own children, you know, it's not one 773 - > of those things anyone plans for.

774 - > No, but it happens. 775 - > SPEAKER_02: But it happens, it's some insane stat like one in two 776 - > people in the UK get divorced. 777 - > Uh one in two marriages fail. 778 - > And then I think every time you remarry the percentage chance 779 - > goes up, so it becomes statistically likely that you 780 - > will get divorced again.

781 - > Oh, I didn't know that. 782 - > Yeah, so I think it's like 50% on the first marriage, 70% on 783 - > the second, and nearly 90% on the third, or something like 784 - > that. 785 - > It's it's insane. 786 - > Um like a serial divorce.

787 - > Yeah, exactly. 788 - > Yeah, you know, multiple marriages. 789 - > But um again, it's it's um it's it's something that can happen 790 - > and it's uh it's tough to it's tough, it's a tough pill to 791 - > swallow. 792 - > It's even tougher when you see it happen to your kids.

793 - > SPEAKER_01: Yeah. 794 - > SPEAKER_02: Um but again, working with a financial planner 795 - > to make sure that you have those things in place. 796 - > That if you'd like there is nothing better than gifting with 797 - > a warm hand over a cold hand. 798 - > And what we mean on that is that you gift to your you gift while 799 - > you're alive.

800 - > Yeah. 801 - > You can see the money get spent, you can see your kids get 802 - > enjoyment out of it, you can see them buy a house with it, you 803 - > might even be able to see another grandkid out of it 804 - > because you've enabled them to do it. 805 - > We've we heard about that story recently, um, where someone gave 806 - > money to their children uh and then nine months later they had 807 - > another grandkid because that you know the kids would suit the 808 - > kids didn't have children well, another uh another child at that 809 - > point because um they didn't have the money to afford it.

810 - > So it gave them that, you know. 811 - > Which is you know incredible. 812 - > SPEAKER_00: And it's you you think about you think about this 813 - > idea of intergenerational planning, this blaster boo of 814 - > money in the UK and all this kind of stuff of not talking 815 - > about it. 816 - > It's on a call today with um a client who's brought their 817 - > 27-year-old daughter into the picture because you know he's in 818 - > a position where he can and he wants to be open about where 819 - > they are.

820 - > Too many people are secretive, in my opinion, about their their 821 - > assets. 822 - > And look, everyone has their own trust relationship with 823 - > everyone, yeah. 824 - > But at the same time, the opportunity that it opens up for 825 - > you to do. 826 - > I mean, that scenario there, you can you can bring another 827 - > grandchild in.

828 - > I mean, amazing. 829 - > Yeah, it's amazing, you know. 830 - > SPEAKER_02: But doing that in a constructive manner, yeah, so it 831 - > doesn't get lost, you know, and that's not just there you go, 832 - > there's a couple hundred grand or there's a million quid or 833 - > whatever it is, you know, kind of go feel your boots, it's 834 - > doing it in a manner that means that it follows the bloodline, 835 - > um, you know, that there's various things that you can put 836 - > in place because for a lot of business owners, they've worked 837 - > insanely hard, they've sacrificed a hell of a lot, 838 - > typically seeing children and things like that along the way 839 - > as well.

840 - > So it's it's really, really important to um to make it last. 841 - > One of the other things is that what can we do along the way to 842 - > lower tax within the business? 843 - > Like that's that's a key one. 844 - > So we've talked about kind of gifting, uh we've talked about 845 - > gifting, we've talked about putting into pensions.

846 - > Yeah, that's that's a nice one because you if you if your 847 - > husband and wife both work both work for the business, yeah, and 848 - > you know, you can put up to a maximum of 60k, taper allowance 849 - > is permitted, and things like this. 850 - > That's 120 grand each into a pension, that's great. 851 - > If you've got kids in the business, yeah, a couple of 852 - > kids, that's another uh 120 grand each. 853 - > Um, you know, and all of a sudden that starts to get pretty 854 - > meaningful pretty quickly in terms of extracting.

855 - > I think there's things we can obviously set up things like 856 - > SaaSes uh for the for the family as well. 857 - > Um, obviously, although these things are inheritance tax uh 858 - > applicable now, thanks to the current Labour government, but 859 - > you know, who knows on that? 860 - > SPEAKER_00: But from an income tax and ongoing perspective, 861 - > things like a SaaS tool is really useful, especially if 862 - > you're a physical business with a prem uh with a premises, you 863 - > could buy a commercial unit with this pension.

864 - > Very few people know about this. 865 - > So ostensibly, instead of paying uh paying rent off to a landlord 866 - > or you know, a commercial arrangement or whatever you 867 - > have, that rent is rediverted back to your personal wealth in 868 - > the form of a SaaS, which is just a group pension scheme for 869 - > your, you know, a handful of your family members effectively 870 - > you own asset in there. 871 - > So they then that isn't just loss to the business, that's 872 - > another form of tax or cost to the business is having that rent 873 - > going out elsewhere.

874 - > It can stay within it. 875 - > You can reinvest in certain things within the business and 876 - > get other allowances as well. 877 - > Um, other expenses you can put through the business tax 878 - > efficiently, things like there's the electric car scheme, which 879 - > is really useful. 880 - > So you can lease electric cars and there's no um there's very 881 - > limited P11D taxes for you as an individual, um, and you get some 882 - > relief as an expense to the business against corporation tax 883 - > as well.

884 - > SPEAKER_02: Um what other things do you come across in terms of 885 - > insurance, like we covered off before, that's that's a big one. 886 - > Um, making sure that you utilize people within the business, um, 887 - > i.e. 888 - > family members, um, as making sure they're obviously doing 889 - > something for the business.

890 - > But if my wife's doing the books, she doesn't have to be 891 - > doing them for free. 892 - > Yeah. 893 - > Um, you know, um, if my son is 13, 14, I have to get the 894 - > minimum age you can work here. 895 - > Is it for is it 13, 14?

896 - > But you know, if they've got a part-time job within the 897 - > business, I can but I can pay them you know through the 898 - > through the business as well, and that and they're helping. 899 - > Um there's various things I think business owners miss out. 900 - > And what I would say is is like what I suppose what I'm trying 901 - > to say is is that just by by seeing a financial planner with 902 - > regards to this stuff, you're gonna get a lot more than 903 - > someone saying, Oh, you need to put a couple of quid into your 904 - > pension, or you need to, you know, or you know, you need to 905 - > get this money out and invest it with us.

906 - > Like, that's not what we're gonna do. 907 - > And actually, what we really want to do is help you structure 908 - > this in the most effective way. 909 - > So when you do come to exit or not exit, you are financially 910 - > stable. 911 - > SPEAKER_00: And I think tying that then back to a well-thought 912 - > out personal financial plan gives you the motivation to do 913 - > it.

914 - > You know, aside from the tax saving, great, okay, tax saving, 915 - > brilliant, put it in a pension, can't access it for a while. 916 - > But look how it affects things later. 917 - > Yeah, you know, look what it means later if it's left in this 918 - > environment. 919 - > You're gonna pay the tax on it, put it in your back pocket, 920 - > probably spend it.

921 - > If you save some of it, work which you're never gonna catch 922 - > up, you know, to where you could be, which ultimately means you 923 - > either have to sell the business for more, put more pressure on 924 - > that, or you have to work longer. 925 - > Neither of which is ideal. 926 - > So taking these steps, yeah, there's a there's a benefit now, 927 - > and there's a benefit later if it ties into something that's 928 - > meaningful for you. 929 - > So again, back to that challenge is do you have the time and 930 - > headspace to think about this?

931 - > SPEAKER_01: Yeah. 932 - > SPEAKER_00: And I think you need to be in an environment, it 933 - > helps getting away from your office or home or whatever, and 934 - > coming to sitting in an office with us or with somebody where 935 - > you can just be focused on this thing, you know, because 936 - > ultimately there's always a million distractions when you 937 - > run the business. 938 - > SPEAKER_02: 100%. 939 - > And it's mate, and it's giving yourself that headspace as well, 940 - > because so many people just keep fobbing it off, fobbing it off, 941 - > fobbing it off, fobbing it off.

942 - > And the longer you fob it off, it becomes too late. 943 - > And it's an important part, like you're clever with your 944 - > business, that's why it's been successful. 945 - > You need to be clever with how you, you know, jet with the 946 - > funds that you generate from the business to ensure that you know 947 - > they do um they get you where you want, and you're not paying 948 - > unnecessary tax. 949 - > That's one of business owners' biggest gripes is paying uh tax 950 - > unnecessarily.

951 - > Well, look, I've hope you found that useful. 952 - > If you're a business owner and you want to talk to Stuart or or 953 - > any of the other financial planners within our team, 954 - > they've got wealth, they have a wealth of experience. 955 - > Um at Hoxton Wealth, we are experts in helping people with 956 - > businesses plan for their theirs and their families' futures. 957 - > And if you'd like to know more, please email us at 958 - > client.

services at hoxtonwealth.com and we'll get 959 - > in touch. 960 - > I hope you found it useful. 961 - > Thanks very much for your time and have a great day.