How to invest your money post business sale
When the time comes to sell, it’s important to not only prepare your business but also make sure that the wealth you receive from the sale is protected and managed correctly to help you achieve your personal financial goals.
Regardless of the amount you receive from the sale of your business, it’s vital to identify the direction you wish to take your funds and how it will benefit you, your family and your estate.
Whether you wish to grow your profit or save for retirement, there are options to consider.
Growing Your Profits
It is important to keep in mind that the longer you invest, the better your capital appreciation and returns might be. You may wish to invest short-term, however, investing for terms less than five years in risk assets such as shares, brings an increased chance of loss of capital.
With risk, it’s essential to understand how it will affect your plans and standard of living. If you are flexible with your money, you will have time to recover from any economic downturn, whether that takes months or years, again depending on the type of investment you have.
As tempting as it may be to focus on the short-term investments for the quick reward, to make sure your funds have stability, it is best to avoid investing in very high risk assets such as cryptocurrencies, forex and commodity trading or buying shares from smaller AIM listed companies that are not yet established or profitable.
To make sure your shares do become valuable, investments should be made in a mix of small, mid-sized or large companies globally. As a result, you may receive dividends which are a great source of income and can be reinvested to grow your capital.
It is important, however, to remember that dividends are taxed at a different rate from savings interest. £2000 is available tax-free to everyone and if you pre-plan your taxes, you can split any taxable dividend income between you and your spouse, meaning you can reduce your tax liability by up to £650 (32.5%) per year. Another benefit is that dividends are exempt from National Insurance Contributions.
Planning for retirement
Pensions are a highly tax efficient way of saving money and when you decide to take benefits there are a range of options available, many people take an annuity. An annuity is a type of retirement income product that you can buy with some or all of your pension, resulting in regular income for life or a set period. Any funds you do receive from an annuity will be taxed as normal income. It’s important to remember that for most annuity products that once you buy it you cannot change the form chosen at outset.
Another option is to take benefits via income drawdown, drawdown income is more flexible but can have greater risks. This is because the income you generate is subject to market performance. With this option, you can move your money to more than one fund and adjust the amount paid out as well as how frequently you receive it.
With the various options available, knowing where and how to invest your wealth post-sale can be quite confusing. To ensure you make the right decisions for your financial future important that you speak with a financial planner who will be able to guide you.
Get in touch
If you would like to discuss how your money can be invested post-sale, please contact us via the form below.
Mazars Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. In the event that you are dissatisfied with a recommendation we have made you may be entitled to make a complaint. We have a complaints procedure that is available on request. If you wish to register a complaint please contact us:
The Compliance Officer, Mazars Financial Planning Limited, 45 Church Street, Birmingham, B3 2RT
By Phone: 0121 232 9605
By E-mail: email@example.com
The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves.
To contact the Financial Ombudsman Service please visit www.financial-ombudsman.org.uk
Want to know more?
How to plan for Successful Succession
Succession planning is the strategic process of identifying the future leaders of your business; those who will take over when current leaders step down.
Tax Implications of Business Sale
When buying or selling a business, there are numerous tax opportunities as well as potential tax pitfalls. Not planning ahead or ignoring tax implications can end up being an expensive slip-up.
Recognised by the FT Adviser as one of the Top 5 firms in the UK for Financial Planning, our unbiased approach sets us apart from other financial planning firms.