I love seeing the success of a business realised by the owners who have worked so hard in it and I have enjoyed advising on hundreds of transactions over the years. There is so much that I could write on this topic so I am going to break it down into a series of articles over the coming weeks covering different tax aspects.

Let’s start with a common question I am asked – how much tax will I have to pay on selling my shares? Well, like any good tax adviser, I respond with “it depends!”:

• If you qualify for Business Asset Disposal Relief (previously Entrepreneurs’ Relief) then it’s 10% on your first £1m (which is a lifetime limit).
• If you originally invested under EIS or Seed EIS then it could be 0% if you’ve owned the shares for the qualifying period of 3 years and claimed the original relief.
• Alternatively, if you didn’t qualify for EIS, you might qualify for Investor’s Relief, which would be a 10% tax rate on up to £10m (which is another lifetime limit).
• If you own any shares via a company then you might benefit from Substantial Shareholdings Exemption, where there is no tax to pay in the company but you need to consider how you extract the proceeds.
• And if you sell the company to an Employee Ownership Trust then it’s an unbelievable 0%.
• Anything else and it’s likely to be at the main rate of 20%.
• Be careful though, because if you get things wrong (for example, selling to connected persons or proceeds being linked to your ongoing employment) then it could be as high as 39.35% or 47%!

It is always advisable to plan ahead wherever possible so that you can minimise your tax liability on exit. For example, you might be able to use family members’ allowances and lifetime limits or organise your affairs to benefit from certain tax reliefs or deferrals.

If you are considering selling your business and want to minimise your tax liabilities then please do not hesitate to get in touch.

I know that pension savings aren’t everyone’s cup of tea but they do offer a highly tax efficient means of saving for retirement, reducing corporation tax and they can be a valuable inheritance tax saving tool.

Many people I know like to maximise their contributions, which ordinarily means a payment of £40,000 per annum (being the maximum annual allowance). They also tend to make one off contributions at the end of their accounting period, many of which are coming up on 31 December 2022. However, there’s an important reason to consider whether to make the payment before that date or delay it into the next accounting period.

Corporation tax rates are increasing from 1 April 2023, meaning that a company with a 31 December 2023 year end and profits in excess of £250,000 will save at an average rate of 23.5%. So, would you rather obtain tax relief of £7,600 on every £40,000 of contributions made before 31 December 2022 or delay until 1 January 2023 onwards and obtain relief of £9,400, saving an additional £1,800 of corporation tax?

If your profits are between £50,000 and £250,000 then the saving is greater as the marginal rate of corporation tax between those amounts for a 31 December 2023 year end is 24.65%, thereby saving £2,260 per £40,000 contribution.

The amounts may seem trivial to some but if you make significant pensions contributions across your owner managed business then I strongly recommend reviewing this in more detail. The same approach applies to year ends of 31 March 2023, where the savings are even greater of £3,000 for a marginal rate company.

If you haven’t already done so, it is also possible to access unused allowances from the three previous tax years, which could mean a one off contribution of £160,000 per person and the additional tax savings thereon.

There will be many other matters to consider (such as the cash flow cost of delaying the tax saving) and you should seek advice based on your individual circumstances before taking any action.